THE INDIAN COMMUNITY SCHOOL, KUWAIT

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THE INDIAN COMMUNITY SCHOOL, KUWAIT SERIES : I MODEL / 207-208 CODE : N 030 TIME ALLOWED : 3 HOURS NAME OF STUDENT : MAX. MARKS : 80 ROLL NO.

1 THE INDIAN COMMUNITY SCHOOL, KUWAIT SERIES : I MODEL / CODE : N 030 TIME ALLOWED : 3 HOURS NAME OF STUDENT : MAX. MARKS : 80 ROLL NO. :.. CLASS/SEC :.. NO. OF PAGES : 3 ECONOMICS ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ SECTION A. TC can be calculated as: (a) AVC/Q (b) Sum of MC (c) TFC+TVC (d) both (b) and (c) 2. When total utility is falling, marginal utility is (a) zero (b) minimum (c) maximum (d) negative 3. The quantity demanded of a good would change in the opposite direction and greater proportion as the price changes only when demand is (a) elastic (b) inelastic (c) perfectly inelastic (d) unitary elastic. State two reasons for the law of demand. 5. Explain the meaning of opportunity cost. Why does the Production Possibility Curve have an increasing slope? Explain. The economic problem is the problem of choice. Explain Give any four factors that can cause a rightward shift of demand curve. 8. Explain the implications of the freedom of entry and exit feature of Monopolistic competition. 9. State and explain any four factors that determine the price elasticity of demand for a good.

2 0. Explain the conditions of producer s equilibrium with the help of a numerical example. Use marginal cost and marginal revenue approach.. Complete the following table: Output MC AVC TC AFC Explain the meaning and implications of price ceiling and price floor. State whether the following statements are true or false. Give reasons for your answer: (i) When market price is lesser than equilibrium price there will be excess supply in the market. (ii) X and Y are complementary goods. A fall in the price of Y will result in a rise in the price of X. SECTION B 3. Repo rate is the rate at which (a) commercial banks purchase government securities from the central bank (b) commercial banks can take loans from the central bank (c) commercial banks can keep their deposits with the central bank (d) short-term loans are given by commercial banks. When aggregate demand is greater than aggregate supply, inventories (a) fall (b) rise (c) do not change (d) first fall, then rise 5. Give the meaning of under-employment equilibrium.. State any two functions of money. 7. What are tax revenue? Classify the following into revenue receipts and capital receipts: (i) Recovery of loans (ii) Profits of public sector undertakings 3 8. Explain how can government budget be useful in influencing allocation of resources in an economy Explain money creation function of commercial banks. Explain the varying reserve requirements method of credit control by the central bank.

3 20. (i) Why are imports deducted while calculating domestic product through the expenditure method? (ii) Why are free facilities given to employees included in national income? Distinguish between nominal income and real income. Explain why due to the presence of non- monetary production, real national income on its own cannot be treated as a true index of welfare. 2. An economy is in equilibrium. From the following data calculate investment expenditure: (i) Marginal propensity to consume = 0 9 (ii) Autonomous consumption = 200 (iii) Level of income = Explain the distinction between the flexible exchange rate and the managed floating exchange rate. Explain by giving examples, the distinction between depreciation and devaluation of domestic currency. 23. In an economy, investment increased by,00 and as a result income increased by 5,500. Had the marginal propensity to save been 25 percent, what would have been the increase in income? 2. Calculate national income (. in crores) (i) Profit,000 (ii) Mixed income of self-employed 5,000 (iii) Dividends 200 (iv) Interest 00 (v) Compensation of employees 7,000 (vi) Net factor income to abroad 00 (vii) Consumption of fixed capital 00 (viii) Net exports ( ) 200 (ix) Net indirect taxes 800 (x) Net current transfers to rest of the world 0 (xi) Rent 500

4 ECONOMICS CLASS 2 - MODEL 207 MARKING SCHEME S.No Value Points : SECTION A Marks. TC can be calculated as: (a) AVC/Q (b) Sum of MC (c) TFC+TVC (d) both (b) and (c) Ans. (d) both (b) and (c) 2. When total utility is falling, marginal utility is (a) zero (b) minimum (c) maximum (d) negative Ans. (d) negative 3. The quantity demanded of a good would change in the opposite direction and greater proportion as the price changes only when demand is Ans. (a) elastic. State 2 reasons for the law of demand. Ans. Substitution effect, income effect, law of diminishing marginal utility..(any 2) 5. Explain the meaning of opportunity cost Ans.The value of the next best alternative foregone. Why does the Production Possibility Curve have an increasing slope? Explain. Ans.PPC is concave to origin due to increasing marginal rate of transformation. ½ Diagram showing increasing MRT. ½ The economic problem is the problem of choice. Explain. Ans. Economic problem arises due to a. Scarce resources available b. Human wants unlimited c. Resources have alternate uses. 7. Give any four factors that can cause a rightward shift of demand curve. Ans. Rightward shift of demand curve represents increase in demand for a good by a consumer, which is caused due to a.increase in price of substitute goods b.decrease in price of complementary goods c.rise in income in case of normal good d.fall in income in case of inferior good e.favourable change in tastes and preferences.(any three) ¾ x = 3 Diagram showing rightward shift. 8. Explain the implications of the freedom of entry and exit feature of Monopolistic competition. Ans. Monopolistic competition definition There are no barriers to the entry or exit of firms to the industry. Therefore, firms can enter or exit freely. If existing firms earn abnormal profits, new firms can enter. If existing firms incur losses, they can leave the industry. Firms earn normal profits in the long run. 9. State and explain any four factors that determine the price elasticity of demand for a good. 3

5 Ans. Availability of close substitutes, total expenditure spent on a good, time, habits of consumers, any relevant point. ½ x = 0. Explain the conditions of producer s equilibrium with the help of a numerical example. Use marginal cost and marginal revenue approach. Ans. Conditions explained 3 marks Numerical example 3 marks.. Complete the following table: (each correct entry ½ marks) Output MC AVC TC AFC Explain the meaning and implications of price ceiling and price floor. Ans. Meaning and implication: marks Diagram showing both prices State whether the following statements are true or false. Give reasons for your answer: Ans. 3 marks each (i) When market price is lesser than equilibrium price there will be excess supply in the market. False, excess demand situation (ii) X and Y are complementary goods. A fall in the price of Y will result in a rise in the price of X. True, as both are used together by consumer and only demand curve shifts rightward, supply remaining unchanged 3 x 2 = S. No Value Points: SECTION B Marks 3. Repo rate is the rate at which Ans. (b) commercial banks can take loans from the central bank. When aggregate demand is greater than aggregate supply, inventories Ans. (a) fall 5. Give the meaning of under-employment equilibrium. Ans. When aggregate demand for goods and services are equal to aggregate supply of goods and services at a level less than the full employment.. State any two functions of money. Ans. (Any 2) 7. What are tax revenue? Classify the following into revenue receipts and capital 3 receipts: (i) Recovery of loans (ii) Profits of public sector undertakings Ans. Definition mark, Classification- mark each 8. Explain how can government budget be useful in influencing allocation 3

6 of resources in an economy. Ans. Any 3 relevant points x 3 = 3 9. Explain money creation function of commercial banks. Ans. Example used with the help of table showing deposit creation by banks. Points explained. Explain the varying reserve requirements method of credit control by the central bank. Ans. Define Types of reserve requirements CRR, SLR mark Increase in requirement explained ½ marks Decrease in requirement -explained ½ marks 20. i. Why are imports deducted while calculating domestic product through the expenditure method? ii. Why are free facilities given to employees included in national income? Distinguish between nominal income and real income. Explain why due to the presence of non- monetary production, real national income on its own cannot be treated as a true index of welfare. 2. An economy is in equilibrium. From the following data calculate investment expenditure: (i) Marginal propensity to consume = 0 9 (ii) Autonomous consumption = 200 (iii) Level of income = 0000 Ans. Formula Y = C + I, Consumption function formula, Substitution and answer- 22. Explain the distinction between the flexible exchange rate and the managed floating exchange rate. Ans. points of distinction ½ x = Explain by giving examples, the distinction between depreciation and devaluation of domestic currency. Ans. points of distinction ½ x = 23. In an economy, investment increased by,00 and because of it income increased by 5,500. Had the marginal propensity to save been 25 percent, what would have been the increase in income? Ans. Formulae, Substitutions-, answer 2. Calculate national income (. in crores) (i) Profit,000 (ii) Mixed income of self-employed 5,000 (iii) Dividends 200 (iv) Interest 00 (v) Compensation of employees 7,000 (vi) Net factor income to abroad 00 (vii) Consumption of fixed capital 00 (viii) Net exports ( ) 200

7 (ix) Net indirect taxes 800 (x) Net current transfers to rest of the world 0 (xi) Rent 500 Ans. Formula of NNPfc by income method-, substitution-, answer- NNpfc = = 23,800

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Downloaded from XII ECONOMICS SURE SHOT SHORT ANSWER QUESTIONS MICROECONOMICS UNIT - INTRODUCTION Q. Distinguish between microeconomics and macroeconomics. 3 Q.2 Discuss the central problems of an economy. Why do they