Free of Cost ISBN : CS Foundation Programme (Solution upto June & Questions of Dec included) June

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1 Free of Cost ISBN : Appendix CS Foundation Programme (Solution upto June & Questions of Dec included) June Paper - 2 : Economics and Statistics Part - 2A : Economics Chapter - 1 : Nature and Scope of Economics June [2] (a) (i) Please refer Dec [1] {C} (b) on page no June [3] (i) Please refer Dec [1] {C} (a) on page no. 16 Chapter - 2 : Demand and Supply Analysis June [2] (a) (ii) Supply & Stock : Supply refers to the amount of a good that producer are willing and able to offer in a market at a certain price during a certain price. It is a schedule of possible prices & corresponding amount that would be offered for sale at each such price by supplier for a defined period. On the other hand stock refers to the actual quantity of the goods that is available for sale in the market at a certain time irrespective of the prevailing prices. In no case supply can exceed the stock of the goods. Supply is that part of stock that the producers are willing & able to offer in a market June [3] (ii)

2 Appendix CS Foundation Programme Paper 2 2 Please refer Dec [1] (a) (ii) on page no. 29 Chapter - 3 : Production Costs and Revenue Analysis June [2] (a) (iii) Please refer Dec [3] (c) on page no. 66 Chapter - 4 : Equilibrium of the Firm and Industry June [3] (iii) Please refer Dec [3] (a), Dec [3] (a) on page no. 89 & 91 Chapter - 5 : Basic Characteristics of the Indian Economy June [2] (a) (iv) Please refer to Question 7 & 8 under Topic not yet asked but equally important for examination of Chapter 5 Basic characteristics of the Indian Economy June [3] (iv) Economic welfare is closely related to composition and distribution of national income. Economic welfare generally increases with increase in national income. But this proposition may not hold true as economic welfare is closely linked to composition and distribution of nation income. Please refer to Dec [4] (b) on page No Chapter - 6 : Select Areas of Indian Economy June [4] (i) (ii) (i) Balance of Payment:- It is a systematic records of all the economic transactions between the residents of one country and the residents of rest of the world in a year. It is one of the most important statistical statement for any country. Disequilibrium in Balance of Payment:- It refers to the difference between the receipts and payments as revealed by the sectional accounts of the varieties of items in various groups and not in total debits and credits in the balance of payment as a whole because it is always in balance based on rule of double entry system of book keeping. Its such disequilibrium may be in the form of surplus or deficit. Causes of Disequilibrium:-

3 (ii) Appendix CS Foundation Programme Paper Growth of Population:- With increase in population, the need for import increases and the capacity for export decreases. This leads to disequilibrium in BOP. 2. Inflation:- Due to inflation, export of a country decrease and demand for imports increases as the imports become cheaper. It results in disequilibrium. 3. Increase in national Income:- Increase in national Income leads to increase in import which ultimately leads to disequilibrium in BOP. Steps to overcome disequilibrium in BOP are as follows: 1. Increase in exports. 2. Import restriction and Import substitution. 3. Devaluation of domestic currency. 4. Encouraging foreign direct Investments. 5. Mobilizing other sources of earning foreign exchange e.g. encouraging tourism. Objectives and tools of fiscal policy Fiscal Policy:- Refer to Question 7 of Chapter - 6. Objectives of Fiscal Policy:- Please refer to 2008-Dec (3)(b) under Descriptive Questions of chapter - 6 Select Areas of Indian Economy. Tools of Fiscal Policy:- The various tools that can be adopted in fiscal policy are as follows: 1. Taxation:- Taxation is an important source of raising revenues of the state. Taxation helps to achieve the basic policy of equitable distribution of income & wealth. 2. Public Expenditure:- Public expenditure is also one on the important tool of fiscal policy. Public expenditure can be both developmental or nondevelopmental. 3. Public Debt:- Public Debt is also one on the important means of meeting capital expenditure. Public expenditure is less inflationary when compared to levying of indirect taxation. Chapter - 7 : Money and Banking June [1] {C} (c) Please refer to Question 1, 3, 8 under heading Topic not yet asked but equally important for examination of Chapter 7 Money and Banking June [4] (iii)

4 Appendix CS Foundation Programme Paper 2 4 Please refer Dec [4] (a) on page no. 149 Chapter - 8 : Economic Reforms and Liberalization June [4] (iv) Refer to Question 4 under Topic not asked but equally important for examination of chapter - 8 Economic Reforms & Liberalization. Objectives of World Trade Organization:- Refer to Question 7. Principles of WTO Trading System:- Please refer to Question 16. Chapter - 9 : Objective Question June [1] {C} (a) (b) (a) (i) True:- Negative income elasticity for a product would indicate that the product is an inferior product. Negative income elasticity of demand implies that given an increase in income, the quantity demanded of that commodity decreases. Goods having negative income elasticity are known as inferior goods as their demand falls as income increases. For examples the demand of the inferior product like bajra will decrease with increase in income. (ii) True:- Each firm in the monopolistic competition has a downward slopping demand curve with every increase in price of good, the consequent demand would fall. The concept of purchasing power holds. With every increase in prices, the purchasing power of money falls i.e. one has to pay more to get same amount of goods and services. (iii) False:- Purchasing power of money falls with increase in price. Purchasing power can be defined as the number of goods/ services that can be purchased with a unit of currency. With every increase in prices, the purchasing power of money falls, i.e. one has to pay more to get same amount of goods & services. So with increase in price, the purchasing power falls & vice-versa. (iv) False:- Budget deficit is not the same as fiscal deficit. Budget deficit is the difference between the total receipts & total expenditure. When we add borrowings and other liabilities to the budget deficit than it becomes fiscal deficit. Fiscal deficit can also be arrived at by deducting governmental expenditure from revenue receipts. (v) False:- WTO helps the member nations to solve their trade conflicts. It will not help the countries to solve the political disputes. WTO helps in enhancing international co-operation among the member countries. (b) (i) (c) Tertiary Sector (ii) (a) Maximum (iii) (c) Increase in its price (iv) (d) Inflation in India

5 (v) (b) Monopoly June [2] (b) (i) Adam Smith (ii) Monetary (iii) Inelastic (iv) Satisfaction (v) Depreciation (vi) Production Function Appendix CS Foundation Programme Paper 2 5 Part - 2B : Statistics Chapter - 2 : Collection & Presentation of Statistical Data June [6] (a) (i) Deliberate sampling refers to an act of sampling whereby the investigator uses his discretion to include or reject any item in a sample whereas on the other hand Random sampling refers to sample technique in which each & every item of the universe is given equal chance of being included in the sample. In deliberates sampling the items do not have the same chance of being included or rejected. (ii) Classification and tabulation Please refer to 2004-Dec (7)(a) under the heading Distinguish between of Chapter-2 (collection and presentation of statistical Data). (iii) Direct investigation and indirect investigation Direct investigation is a type of investigation where Phenomenon under study is capable of direct quantitative measurement such as age, weight, income, prices, quantities consumed. On the other hand if Phenomenon under study is of a qualitative nature which is not capable of quantitative measurement like honesty, intelligence, beauty etc. are we take recourse to its indirect measurement. The qualitative characteristics is converted into quantitative phenomenon by assigning appropriate standard which may represent the given qualitative phenomenon indirectly. For example, intelligence may be studied through score of a group of individual in a given test. (iv) Historigram Historigram and Histogram Histogram

6 Appendix CS Foundation Programme Paper A historigram is a graph of time series. 2. Historigram are represented by curves on the graph. Histogram is a graph of a grouped frequency distribution obtained by plotting class intervals along X-axis and their respective frequencies on Y-axis. Histogram are represented by a set of adjacent vertical rectangles erected on each group. 3. Historigram are simple to understand and easy to draw June [7] (a) Head of Expense Histogram require expertise in their construction and interpretation. Distribution of Rupee spent on Khadi Amt Spent (Paise) Degree of Angle Farmer 19 19/ = Carder & Spinner 35 35/ = Weaver 28 28/ = Washer man, Dyer & Printer 08 08/ = Administrative Agency 10 10/ = Total 100

7 Appendix CS Foundation Programme Paper 2 7 Chapter - 4: Measures of Dispersion June [7] (c) (d) (c) Calculation of Mean Deviation from Median and Co-efficient of Mean Deviation Size (X) Frequency (F) Cumulative Frequency (c.f.) Deviation from Z = 12 (d) Total Deviation (f) (d) f = 48 3fd = 36 Median, Z = Size of item

8 Appendix CS Foundation Programme Paper 2 8 = Size of item = 24.5 th item = 12 Mean deviation (MD) = = = 0.75 Co-efficient of MD = = = (d) Let N A, N B denote the number of workers in factory A and B. X A, X B denote the average wage per hour in factory A and B. σ A, σ B denote the Standard deviation of wage in factory A and B. Thus we are given. N A = 200 = 15 σ A = = 4 N B = 250 = 12 σ B = = 3 (i) Total wages paid to workers by factory A = Average wage per hour No. of workers in it N A X A = = ` 3,000 Total wages paid to workers by factory B = Average per hour No. of workers in it. N B X B = = ` 3,000 (ii) Co-efficient of variation (CV) in wages in Factory A and B. CV A = 100 = = 26.67% CV B = 100 = = 25% So Factory A has more variability in wages than Factory B. Chapter - 5 : Correlation analysis June [8] (a) (b) (a) (i) Spurious Co-relation:- C It refers to a situation in which the existence of misleading co-relation between two variable is produced through the operation of a third casual variable. C This type of co-relation cannot be genuine because it is a product of accident.

9 Appendix CS Foundation Programme Paper 2 9 C It is a relationship in which two events of variable have no direct connection, yet, it may be wrongly inferred that they do, due to either coincidence or the presence of a certain third unseen factor. (ii) Scatter Diagram:- C It is the simplest method to study the correlation in two variables. C It is concerned with diagrammatic representation of bivariate data. C Scatter diagram is a special type of dot chart used for determining the relationship between two variables. C Under this method the given data are plotted on a graph paper in the form of dots. C By looking at the scatter of the various points one can form an idea as to whether the variables are related or not. (b) Calculation of Co-efficient of Co-relation by using Karl Peason s Method X Y X = (! X) Y = (! Y) XY X 2 Y ! 4 + 8! ! 2 + 4! ! 4! ! 8! ! = = = 14 = = = 12 XY r = = = =!1 X 2 Y 2 So r =!1, The negative Co-efficient of correlation between two variables X and Y indicate that two are perfectly correlated with each other in negative way.

10 Appendix CS Foundation Programme Paper 2 10 Chapter - 6 : Index Numbers and Time Series Analysis June [7] (b) Calculation of Index Numbers Item Base Period Current Period Qty (q 0 ) Price (P 0 ) Qty (Q 1 ) Price (P 1 ) P 0 q 0 P 1 q 1 P 0 q 1 P 1 q 0 A B C D Total P 0 q 0 = P 1 q 1 = P 0 q 1 = P 1 q 0 = 505 Calculation of Index Number by Laspeyre s Method (L 01 ) = 100 = 100 = Calculation of Index Number by Paasche s Method (P 01 ) = 100 = 100 = Calculation of Index Number by Fisher s Method (F 01 ) = 100 = 100 = 100 = 100 = = June [8] (c) (d) (c) Problems in Construction of index number (1) Determining the purpose:- Purpose for which index number are constructed should be very clear because that would determine the number of commodities, their selection, the use of average, the base year and the type of price quotation to be used.

11 (d) Appendix CS Foundation Programme Paper 2 11 (2) Selection of Base Period:- We should choose an appropriate base year. The base year should be normal and have stable economic conditions. (3) Selection of Commodities:- The commodities, their number and varieties should be relevant for the purpose of Index Number For example, different for wholesale price indices and consumer price indices. (4) Price Quotation:- Selection of sources of price quotation should be made very Judiciously. Price should be reliable, accurate and adequate. (5) Selection of Weight:- Weight signify the relative importance of items in a group weight should not be arbitrary and haphazard. Calculation of Trend values by using Least square Method Year No. of workers Deviation of year from 2008 Trend value ( 000) (Y) (X) (X 2 ) (XY) (Y = a + bx) !2 4! (!2) = !1 1! (!1) = (0) = )1 1 +) (1) = )2 4 +) (2) = 15.8 N = Y = 65 3X = 0 3X 2 = 10 3XY = 14 5 Trend equation, X = a + bx Now, we will find out the values of a and b from the following two normal equation. 3Y = na + bzx 65 = 5a + bx0 a = 65/5 = 13 3XY = a3x + b3x 2 14 = a b b = 14/10 = 1.4 Y c = Equation of trend line By putting the value of X in above equation, we may find out the trend value for different year.

12 Appendix CS Foundation Programme Paper 2 12 Number of workers in 2011 Y 2011 = (X 2011 = 3) = = 17.2 thousand Chapter - 7 : Objective Questions June [5] {C} (a) (b) (a) (i) Please refer to 1999 June (6) (a) Chapter 1 on page no False:- Statistics cannot prove anything or everything. Statistics is merely a quantitative tool to analyse quantitative phenomenon. Statistics can prove to be very useful but if it is misused it might prove to be disastrous. (ii) False:- For calculation of mean their is no need of setting the series into ascending or descending order series need to be set in ascending or descending order to calculate median. Mean is calculated merely by summing up the different values & then dividing it with number of one sections. (iii) False:- Co-efficient of variation is the degree of variability of a variable. Higher co-efficient of variation signify higher degree of variability that is less uniformity. (iv) True:- Karl Pearson s co-efficient of correlation is not suitable for use when dealing with qualitative characteristics. Karl Pearson method is only used for dealing with quantitative matters. Spearman s Rank correlation formula is the only formula to be used for finding correlation co-efficient if we are dealing with qualitative characteristics. (v) True:- Fisher s index number is an ideal index number because of the following reasons: C It is based on fluctuating weights. C It takes into account current year as well as base year in calculation of index number. C It satisfied time reversal and factor reversal tests. C It uses geometric average in its construction. (b) (i) (b) Boddington. (ii) (d) Data obtained by a firm in a market survey. (iii) (b) Inclusive. (iv) (b) Median. (v) (d) Median. (vi) (b) Mean deviation. (vii) (d) = M = Z (viii) (d) Change in one variable tends to bear constant ratio of change in other variable.

13 Appendix CS Foundation Programme Paper 2 13 (ix) (c) Paasche s Index number. (x) (d) Estimation method June [6] (b) (i) Croxton (ii) Law of Statistical Regularity (iii) Applied (iv) Deciles (v) 1485 (vi) 175 December 2011 Part : 2A Chapter - 1 : Nature and Scope of Economics Dec [3] Attempt the following : (i) Economics is not an exact science. Comment. (5 marks) Chapter - 2 : Demand and Supply Analysis Dec [2] (a) Distinguish between the following : (i) Change in supply and change in quantity supplied with the help of diagram(s). (3 marks) Chapter - 3 : Production Costs and Revenue Analysis Dec [2] (a) Distinguish between the following : (ii) Internal economies of scale and external economies of scale. (3 marks) Dec [4] Attempt the following: (i) Examine the factors which influence the quality of the labour force. (5 marks) (ii) Explain the basic concepts of costs which a firm considers in short-run. (5 marks) Chapter - 4 : Equilibrium of the Firm and Industry Dec [2] (a) Distinguish between the following : (iv) Monopoly and monopolistic competition. (3 marks) Chapter - 5 : Basic Characteristics of the Indian Economy Dec [3] Attempt the following : (ii) Rapid industrialisation is necessary for fast economic development. Comment. (5 marks) Chapter - 6 : Select Areas of Indian Economy Dec [2] (a) Distinguish between the following : (iii) Balance of trade and balance of payments. (3 marks)

14 Appendix CS Foundation Programme Paper Dec [3] Attempt the following : (iii) Urbanisation is a resource costly phenomenon for an economy like ours. Comment. (5 marks) Dec [4] Attempt the following: (iv) What are the major components of receipts and expenditure that are included in the preparation of budget of Government of India? (5 marks) Chapter - 7 : Money and Banking Dec [4] Attempt the following: (iii) Explain the different components of money supply in India. (5 marks) Chapter - 8 : Economic Reforms and Liberalization Dec [3] Attempt the following : (iv) What is World Trade Organisation (WTO)? Discuss its objectives. (5 marks) Chapter - 9 : Objective Questions Dec [1] {C} (a) State, with reasons in brief, whether the following statements are true or false : (i) Price elasticity of demand of a commodity is affected by the number of its substitutes. (ii) The law of variable proportions is a long-term phenomenon. (iii) Price discrimination is possible in monopoly only. (iv) Primary sector in India no longer provides employment to majority of the work force. (v) Monetary policy is formulated and implemented by Government of India. (2 marks each) (b) Write the most appropriate answer from the given options in respect of the following : (i) Which of the following is not one of the basic micro economics questions (a) What to produce (b) For whom to produce for (c) How to make use of labour or machinery (d) How to maximise social welfare. (ii) Utility means (a) Power to satisfy a want (b) Quality of a service (c) Willingness of a person to purchase (d) Desire to have a good. (iii) In which market an individual firm cannot influence price (a) Perfect competition (b) Monopoly

15 Appendix CS Foundation Programme Paper 2 15 (c) Monopolistic competition (d) Oligopoly. (iv) The biggest source of domestic savings in India has been (a) Household savings (b) Public sector savings (c) Government revenue surpluses (d) Corporate savings. (v) Fiscal policy is connected with (a) Issue of currency (b) Exports and imports (c) Public revenue and expenditure (d) All of the above. (vi) Bank rate means (a) Interest rate payable by RBI on deposits of commercial banks (b) Interest rate charged by banks on loans and advances (c) Interest rate payable on bonds (d) The rate at which RBI discounts the bills of exchange. (vii) If marginal utility derived from the consumption of a commodity by the consumer is zero, the total utility will be (a) Minimum (b) Maximum (c) Zero (d) None of the above. (viii) Which one of the following cost curves always slopes downwards (a) Total fixed cost curve (b) Short-run average cost curve (c) Average variable cost curve (d) Average fixed cost curve. (ix) Which theory is generally studied in micro economics (a) Price theory (b) Income theory (c) Employment theory (d) None of the above (x) The headquarters of World Trade Organisation (WTO) is located at (a) New York (b) Doha (c) New Delhi (d) Geneva. (1 mark each)

16 Appendix CS Foundation Programme Paper Dec [2] (b) Re-write the following sentences after filling-in the blank spaces with appropriate word(s)/figure(s) : (i) Production function is defined as the relationship between input and output. (ii) A firm is a unit engaged in the task of producing or selling of some specified goods or services. (iii) The concept of socialist economy has its origin in the drawbacks of. (iv) India has reserves of high quality iron ore. (v) The National Rural Employment Guarantee Scheme was implemented from February, 2006 in identified districts of the country. (vi) is the apex institution of Indian financial system. (1 mark each) Part : 2B Chapter - 1 : Descriptive Statistics Dec [7] Attempt the following : (i) Briefly explain the various stages of statistical enquiry. (5 marks) Chapter - 2 : Collection & Presentation of Statistical Data Dec [6] (a) Distinguish between the following : (i) Continuous variable and discrete variable. (3 marks) (ii) Exclusive series and inclusive series. (3 marks) (iii) Frequency polygon and frequency curve. (3 marks) Dec [7] Attempt the following : (ii) Differentiate between census investigation and sample investigation. State the conditions in which census investigation is suitable. (5 marks) (iv) Present the following data in the form of histogram on a graph sheet : Weekly Wages (`) No. of Workers (5 marks) Chapter - 3 : Measures of Central Tendency Dec [7] Attempt the following : (iii) Define average. What are the characteristics of a good average? (5 marks)

17 Appendix CS Foundation Programme Paper Dec [8] (a) Calculate the mode from the following distribution : Wages more than (`) No. of Workers (5 marks) Chapter - 4 : Measures of Dispersion Dec [6] (a) Distinguish between the following : (iv) Coefficient of variation and variance. (3 marks) Dec [8] (b) Calculate coefficient of standard deviation from the following data : Marks Obtained No. of Students (5 marks) Chapter - 5 : Correlation Analysis Dec [8] (c) From the information given below, find out the coefficient of correlation : No. of pairs of observation 10 Assumed mean for X series 82 Assumed mean for Y series 68 Sum of deviations of X from assumed mean (-) 170 Sum of deviations of Y from assumed mean (-) 20 Sum of the multiplication of deviations of X and Y 3,044 Total of square of deviations of X 8,288 Total of square of deviations of Y 2,264 (5 marks) Chapter-7 : Money and Banking Dec [5] {C} (a) State, with reasons in brief, whether the following statements are true or false : (i) A single fact, even though numerically expressed cannot be called statistics. (ii) It is safe to take the published statistics at their face value without knowing their meaning and limitations. (iii) Median is a positional average. (iv) A relative measure of dispersion cannot be used to compare dispersions of two or more distributions. (v) The purpose of forecasting is to provide future data with perfect precision. (2 marks each) (b) : (i) Write the most appropriate answer from the given options in respect of the following The most acceptable and comprehensive definition of statistics in the sense of numerical data is given by (a) Bowley (b) Fisher

18 Appendix CS Foundation Programme Paper 2 18 (c) Horace Secrist (d) A. K. Sen. (ii) Which of the following statistical techniques is useful for economic planning (a) Time series analysis (b) Index numbers (c) Forecasting techniques (d) All of the above. (iii) Which of the following statements is not true about census investigation (a) It is comprehensive (b) More time is required (c) Accuracy is very low (d) Cost is very high. (iv) Which of the following is a mathematical average (a) Median (b) Mode (c) Quartiles (d) Harmonic mean. (v) Which of the following measures is suitable to study inequality of income and wealth (a) Inter-quartile range (b) Mean deviation (c) Range (d) Lorenz curve. (vi) The value of correlation coefficient r is independent of (a) Point of origin (b) Unit of measurement (c) Both (a) and (b) (d) Neither (a) nor (b). (vii) Secular trend is the tendency of data to (a) Increase over a long period of time (b) Decrease over a long period of time (c) Stagnate over a long period of time (d) Either (a) or (b) or (c) (viii) Fisher s ideal index number satisfies (a) Unit test (b) Time reversal test (c) Factor reversal test (d) All of the above.

19 Appendix CS Foundation Programme Paper 2 19 (ix) Tabulation of data is done (a) Before classification (b) After classification (c) No restrictions (d) None of the above. (x) Which of the following measures of central tendency can be used for further algebraic treatment (a) Geometric mean (b) Harmonic mean (c) Arithmetic mean (d) All of the above. (1 mark each) Dec [6] (b) Re-write the following sentences after filling-in the blank spaces with appropriate word(s)/figure(s) : (i) Arrangement of data on the basis of certain characteristics is called of data. (ii) In a statistical enquiry, is a person who answers to the set of questions included in the questionnaire. (iii) In random sampling, each and every item of universe has probability of being selected. (iv) measures the degree and intensity of relationship between two variables. (v) Data which have been collected by somebody else are called (vi) A diagram having two dimensions is known as (1 marks each) Shuchita Prakashan (P) Ltd. 25/19, L.I.C. Colony, Tagore Town, Allahabad Visit us :