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2 SOLUTIONS TO THE CPT DEC 2017 EXAM ECONOMICS 1. If the price of petrol increases, the demand for automobiles decreases, then the petrol and automobiles are a) Perfect substitutes b) Substitutes c) Perfect complements d) Complements Samvit Academy Tip - Petrol and Automobiles are complements as they show an inverse relationship. 2. Demand for a commodity refers to a) Amount of quantity demanded at a certain price during any particular period of time. b) Desire for the commodity c) Quantity demanded of that commodity d) Need for the commodity. Samvit Academy Tip Demand is the quantity of goods and services that the consumers are willing and able to purchase from the market at a given price in a given period of time. 3. What is the reason for the downward slope of demand curve towards right? a) Marginal utility of the commodity decreases b) Substitution effect when price of commodity decreases c) Income effect when price of commodity decreases d) All of the above Samvit Academy Tip - The demand curve sloped downward to the right because of substitution effect, income effect, new consumers and is also the MU curve of a given consumer. (MU curve also is downward sloping) 4. Demand for electricity is elastic because: a) It has alternative uses b) It has number of close substitutes c) It is very expensive d) Its supply is erratic Samvit Academy Tip - Demand for electricity is elastic as it has many uses. More the number of uses a commodity has, if price increases, it will be used only for the more important purpose and vice versa.

3 5. A college of bachelor degree raised their fees by Rs.500 in order to increase their total revenues. But actually their total revenue had fallen. Then demand for bachelor degree is: a) Relatively elastic b) Relatively inelastic c) Unit elastic d) Perfectly elastic Samvit Academy Tip Demand is relatively elastic in this case. Total Outlay Method explains the phenomenon. When the fees of the bachelor s degree increases, and Total revenue falls, i.e. price and total revenue move in opposite directions, demand is said to be elastic. This is because consumers are responsive. 6. The demand of commodity for which a consumer spends more percentage of his income is: a) More elastic b) Less elastic c) Unity d) None Samvit Academy Tip When the position of a commodity in the consumers budget is significant, the demand for such a commodity is said to be more elastic. For commodities such as matchboxes, needles and buttons on which the consumer does not spend much, the demand is less elastic. 7. Supply of a good refers to: a) Actual production of the good b) Total existing stock of the good c) Stock available for sale d) Amount of the good offered for sale at a particular price per unit of time Samvit Academy Tip The supply of a commodity refers to the quantity of goods and services which the suppliers are willing and able to sell in the market at a given price in a given period of time. 8. The consumer is in equilibrium when the following condition is satisfied a) MU x /MU y = P y /P x b) MU x /MU y = MU y /P y c) MU y /MU x = P y /P x d) MU x /P y = MU y /P x Samvit Academy Tip The equilibrium condition of the consumer under ordinal analysis is when MU x /MU y = P x /P y or MU y /MU x = P y /P x

4 9. In case of necessaries the consumes surplus is a) Zero b) One c) Infinity d) Maximum Samvit Academy Tip In case of Necessities, the consumer surplus will be infinity as what the consumer is willing to pay cannot be measured. 10. Consumer surplus can't be measured in terms of money because: (i) Marginal utility of money changes as purchases are made (ii) The stock of money with the consumer decreases (ii) Income of consumer changes (iv) Price of product changes a) i & ii b) i & ii c) iii& iv d) i & iv Samvit Academy Tip In reality the MU of money and stock of money continuously changes as more purchases are made. But for the sake of the law of diminishing marginal utility, MU of money remains constant. 11. Creation of utilities in terms of goods &services is called as a) Marginal utility b) Total utility c) Production d) Distribution Samvit Academy Tip Production is creation of utility or addition of value and not creation of matter is the produced means of production a) Income b) Capital c) Money d) Profit

5 Samvit Academy Tip Capital is also called as produced means of production. This is because capital is used for further production of goods but is itself produced or man - made and not a free gift of nature. 13. Internal & external economies of scale gives birth to: a) Constant returns to scale b) Increasing returns to scale c) Decreasing returns to scale d) All of the above Samvit Academy Tip Increasing Returns to Scale of the Law of Returns to scale arises on account of internal and external economies of scale. 14. Which of the following is an example of an economic cost? a) Interest paid to the bank on the short term loan taken b) Cost incurred on the purchase of raw materials c) Wages paid to labourers d) All of these Samvit Academy Tip Economic cost = Explicit cost + Implicit cost. Options (a), (b) and (c) are examples of explicit costs which involve actual outflow of money. 15. In short run, when output of firm increases its average fixed cost: a) Remains constant b) Decreases c) Increases d) First decreases then increases Samvit Academy Tip AFC decreases as output increases. It is downward sloping from left to right. 16. From the following details, find out the average variable cost of 5 units: Output Total Cost a) 400 b) 900 c) 800 d) 600 Samvit Academy Tip - Total cost at 5 units = 6,000 Total Fixed cost = 1,500 (incurred at 0) Total Variable cost = Total cost Total Fixed cost

6 TVC = 6,000 1,500 = 4,500 AVC = TVC / Q = 4,500 / 5 = The cost of one thing in terms of the alternative given up is known as: a) Production cost b) Physical cost c) Real cost d) Opportunity cost Samvit Academy Tip Opportunity cost is the cost of the next best alternative foregone. 18. Assume that consumer's income and number of sellers in market for goods both falls. Based on this information we conclude that: a) Price will decrease b) Price will increase c) Quantity will increase d) Quantity will decrease Samvit Academy Tip When the consumers income decreases, demand will decrease as a result of which the demand curve will shift to the left. When the number of suppliers decrease, the supply will decrease causing the supply curve to shift upwards. Hence the market will be in equilibrium at a new point where quantity demanded and supplied and price both decrease. 19. In which of the following markets there are no restrictions on transactions? a) Unregulated markets b) Regulated markets c) Spot markets d) Future markets Samvit Academy Tip In unregulated market the Government cannot impose restrictions on transactions. 20. Among the following markets which has high control over the price? a) Imperfect Competition b) Perfect Competition c) Both a) and b) d) Monopoly Samvit Academy Tip In a monopoly market, the seller has complete control over the price. Hence he is called as the price maker.

7 21. Monopoly would usually generate when compared to perfect competition market. a) Higher quantity at higher price b) Lower quantity at lower price c) Higher quantity at lower price d) Lower quantity at higher price Samvit Academy Tip In a Monopoly market the Monopolist faces a downward sloping demand curve unlike a Perfectly Competitive market. (Horizontal demand curve) Also in a Monopoly market the demand curve is relatively inelastic. 22. The Producer s demand for a factor of production is governed by the of that factor: a) Price b) Marginal Productivity c) Availability d) Profitability Samvit Academy Tip The producer s demand for a given factor of production is governed by the price of the factor of production. 23. Science requires art, art requires science, who said this statement? a) Keynes b) Cossa c) Robbins d) Pigou Samvit Academy Tip Cossa gave the definition. 24. NSSO stands for: a) National Student Survey offer b) National Student Securities office c) National Sample Survey Office d) National Statistical Survey Organisation Samvit Academy Tip NSSO stands for National Sample Survey Office 25. Which of the following is a feature of underdeveloped economy? a) Service sector occupies large proportion b) Dependence of foreign aid is absent c) Income inequalities are wide spread

8 d) Favourable balance of payments Samvit Academy Tip There are inequalities of income and wealth in an underdeveloped economy. 26. Which five year plan is also known as Gadgil Yojana? a) 2 nd Five year plan b) 3 rd Five year plan c) 4 th Five year plan d) 5 th Five year plan Samvit Academy Tip The Gadgil Formula was adopted during the 4 th 5 year Plan. There was no formula adopted till then. 27. India has a poverty index of according to Human Development report, a) b) c) d) Samvit Academy Tip The Poverty Index of India is is a national waste of human energy. a) Voluntary Unemployment b) Frictional Unemployment c) Casual Unemployment d) Structural Unemployment Samvit Academy Tip Voluntary unemployment is a national waste of human energy. This is because, a person is said to be voluntarily unemployed when he does not want to be willingly employed. He derives his source of income comfortably without putting his energy into work. 29. NLM was recast into in a)technology mission b) Education for all c) Saakshar Bharat d) Rashtriya Uchataar Shiksha Abhiyan Samvit Academy Tip NLM which is National Literacy Mission was recast into Saakshar Bharat in 2009.

9 30. India s network is the second largest network in the world with the tele density of. a) 75.23% b) 87.66% c) 67.34% d) 65.28% Samvit Academy Tip India s tele density is 75.23% which is the 2 nd largest in the world. 31. Right of children to free and compulsory education act (RTE Act) 2009 has made free education for all children between the age of a fundamental right. a) 5 and 14 years b) 6 and 14 years c) 7 and 14 years d) 8 and 14 years Samvit Academy Tip Under the RTE, a child should be in the age group of 6 14 years for seeking free compulsory education. 32. Monetary policy in India is implemented by:- a) SBI b) RBI c) Ministry of Finance d) Planning Commission Samvit Academy Tip The Monetary policy is formulated by the Central Government and RBI but implemented by the RBI. 33. Monetary policy in India is also called by the name of: a) RBI s policy on money and currency b) Central Bank s economic policy c) Credit policy of RBI d) RBI s policy on money matters Samvit Academy Tip The monetary policy of the RBI is also known as the credit policy of the RBI. 34. During inflation, to control credit, RBI must: a) Increase CRR and decrease Bank rate b) Decrease CRR and Increase Bank rate c) Increase CRR and Increase Bank rate

10 d) Decrease CRR and decrease Bank rate Samvit Academy Tip To control inflation in the economy the RBI should increase CRR and bank rate. In both cases the cost of borrowing of the commercial banks increases as a result of which the credit given becomes costly thereby discouraging the borrower to borrow money. Hence, the money supply in the economy decreases and inflation is controlled. 35. The capital consumed by an economy or a firm in the production process is known as: a) Capital Loss b) Production cost c) Death weight loss d) Depreciation Samvit Academy Tip Capital consumption is the property of wear and tear which capital is subject to. This is also known as Depreciation. 36. Which of the following is a function of Commercial bank? a) Advisor to State Government b) Creation of credit c) Credit control d) Publication of data pertaining to money Samvit Academy Tip Creation of credit, i.e. lending of funds to public is the function of Commercial banks. All other options pertain to functions of the RBI. 37. Which of the following statement is false? a) During inflation, lenders suffer loss and borrowers benefit out. b) During inflation, nominal (fáce value) value of wages decreases while real value of wages increases c) When money supply increases it leads to inflation in the economy d) During inflation, aggregate demand is excess and aggregate supply is relatively less and purchasing capacity of consumer is low. Samvit Academy Tip During inflation, nominal face value of wages decreases while real value of wages increases is incorrect. This is because nominal wages are not affected by inflation and real value of wages decreases as labour becomes more costly. 38. Fiscal policy is concerned with: a) Non banking Financial institutions b) Money and Banking

11 c) Government expenditure, taxation and borrowings d) None of these Samvit Academy Tip Fiscal policy of the Government relates to Government expenditure, Government borrowings and Taxation policies of the Government. 39. In which the Government of India constituted a TRC (Tax Reforms Committee)? a) 1990 b) 1991 c) 1988 d) 1966 Samvit Academy Tip The Tax Reforms Committee was established in the year 1991 by the Government of India under the Chairmanship of Raja J. Chelliah to examine the tax structure of the country and suggest appropriate changes therein. 40. Which of the following is incorrect? a) Sum of budget deficit minus borrowings, loans and liabilities gives fiscal deficit b) If total receipts equals total expenditure, it is called Balanced budget c) If total receipts are greater than total expenses, it is called surplus budget d) Budget deficit is the difference between total receipts and total expenses Samvit Academy Tip Fiscal deficit is Budget deficit + Borrowings and other liabilities. Fiscal deficit is a better measure than Budget deficit as it takes into consideration the actual receipts of the Government which can finance the expenses of the Government. 41. Which of the following is correct? a) Fiscal deficit borrowing and other liabilities gives budget deficit b) Budget deficit borrowings and other liabilities gives fiscal deficit c) Budget deficit + fiscal deficit gives borrowings and other liabilities d) None of the above Samvit Academy Tip Fiscal deficit is Budget deficit + Borrowings and other liabilities. Fiscal deficit is a better measure than Budget deficit as it takes into consideration the actual receipts of the Government which can finance the expenses of the Government. 42. Fiscal policy affects Balance of payments by: a) Affecting Capital Account b) Affecting Current Account c) Affecting both Capital and Current Account d) None of the above

12 Samvit Academy Tip The fiscal policy which is the taxation policy of the Government affects both current account and capital account thus impacting the balance of payments. 43. Important tools of Privatization are: a) Leasing and Contracting b) Franchising, Leasing and Contracting c) Franchising, Leasing, Contracting and Divesture d) Franchising, Leasing, Contracting, Selling and Divesture. Samvit Academy Tip - Various methods of privatization include Franchising, Leasing, Contracting and Divesture. 44. Which of the following Banks is also known as The International Bank for Reconstruction and Development? a) World Bank b) Asia Development Bank c) RBI d) Central Bank Samvit Academy Tip IBRD is also known as the World Bank. 45. GATT was replaced by WTO in the year: a) 1 st January, 1995 b) 1 st January, 1991 c) 1 st April, 1995 d) 1 st May, 1995 Samvit Academy Tip GATT was replaced by WTO on 1 st January Which of the following is not a function of the IMF a) It provides medium and long term loans to its member nations b) It provides machinery for the orderly adjustment of exchange rates c) It is a sort of lending institution in foreign exchange d) It monitors economic and financial development of the member countries Samvit Academy Tip IMF provides short term loans to rectify BOP position of member nations. 47. Which measures have been taken in India towards Globalization? a) Import Liberalization b) Convertibility of Rupee

13 c) Encouragement to foreign investment d) All of the above Samvit Academy Tip Import liberalization, Convertibility of rupee and Encouragement of foreign investment have all contributed towards Globalization. 48. Pensions earned by retired persons are excluded in the calculation of: a) National Income b) Net National Product c) National Product d) GDP Samvit Academy Tip Pensions earned by retired persons are excluded in the calculation of National Income as they are merely transfer incomes. No new product or service has come into existence in order to treat the same as part of national income. 49. Which of the following is the best indicator of economic development? a) Agriculture b) Transport c) Per Capita Income d) Gross Domestic Production Samvit Academy Tip Per capita income is the indicator of economic development as it is derived from National income. Per capita income = National Income / population 50. The National Income of India is estimated by the a) NCAER b) Indian Statistical Institute c) Planning Commission d) Central Statistical Office Samvit Academy Tip National Income is measured by CSO Central Statistics Office.

14 IPCC (NEW SCHEME) ORIENTATION JAN 14 TH, 2018 What you need to know ICAI has introduced a new scheme of training starting from July 1, 2017 After clearing CPT you will be into the new scheme for IPCC Some subjects have been removed, some subjects have been modified Why is Samvit Academy the best in Bangalore? Samvit Academy is the only academy to consistently have the highest pass % in Bangalore over the years Within 1 year, one of our students secured 176 in CPT, the highest in Bangalore in that attempt Within 2 years, we produced an All-India Rank in IPCC an attempt which saw a pass percentage of 4% when other academies were struggling to help students get even the passing marks Quality coaching supplemented with regular tests which ensure you are well prepared before the exam 100% track record of completing syllabus and more importantly completing it within time All-India Rank Holders are going to be teaching you. One of our faculty has secured All-India Ranks in ALL 3 LEVELS of CA and another faculty has secured an All-India Rank in CPT All our faculty have cleared CA in their first attempt making them the best in this field Register for IPCC Orientation Or send an SMS/WhatsApp to with your name to register (It is free of cost to attend but pre-registration is necessary. It is on a first-come first-serve basis) Venue - Malleshwaram 7th Cross opp Malleshwaram Grounds (Near Sri Krishna Sweets and CTR) Timings 6 pm - 7 pm followed by refreshments BRING YOUR PARENTS ALONG

If you found this useful, let us know by sending a message to 9845861108 or an email to info@samvitacademy.

young and brilliant faculty. We wish you the best! Our next CPT Batch starts in July and IPCC Batch starts in August in Malleshwaram, Rajajinagar and Jayanagar. Get to know our faculty CA.

Teaches Financial Management and Accounting CA. Punarvas Jayakumar - The best teacher for Law in Bangalore and probably even the South of India.

She makes it fun and makes you love her subjects Please read our disclaimer These questions have been compiled by Samvit Academy ('we') from Online Sources who have in turn compiled the same

15 If you found this useful, let us know by sending a message to or an to info@samvitacademy.in If you are in Bangalore and would like to attend our classes for CPT or IPCC, let us know through phone or (details above) and we will ensure that you get the best from our amazingly young and brilliant faculty. We wish you the best! Our next CPT Batch starts in July and IPCC Batch starts in August in Malleshwaram, Rajajinagar and Jayanagar. Get to know our faculty CA. Gaurav Rajaram - All India Rank Holder in CPT. Cleared CA in his first attempt. Teaches Accounting and Direct Taxes CA. Chinmaya Hegde - All India Rank holder in ALL 3 levels of CA! Teaches Financial Management and Accounting CA. Punarvas Jayakumar - The best teacher for Law in Bangalore and probably even the South of India. Cleared CA in his first shot although he was from a science background CA. Kriti Goel - Amazing at Cost Accounting and Economics, she has been able to achieve tremendous results in her classes. She makes it fun and makes you love her subjects Please read our disclaimer These questions have been compiled by Samvit Academy ('we') from Online Sources who have in turn compiled the same from students memory as well from our own discussions with students who have written the examination. We cannot give any assurance that the same/similar questions appeared in the examination as it is purely based on memory. Any conclusions that you draw from the above questions and solutions are solely at your risk and we are not responsible for the same.

Centers at Malleshwaram Rajajinagar Yelahanka Mathikere

Centers at Malleshwaram Rajajinagar Yelahanka Mathikere 1. Law of demand explains inverse relationship between a) Price and demand b) Demand and Price c) Income and demand d) Demand and income Samvit Tip: Law of demand states, other things remaining constant