Macroeconomics Practice Paper
Case [Q1-Q5] Money is the commonly accepted medium of exchange. In an economy that consists of only one individual, there cannot be any exchange of commodities and hence there is no role for money. Even if there is more than one individual but these individuals do not take part in market transactions, for example, a family living on an isolated island, money has no function for them.
However, as soon as there is more than one economic agent who engages in transactions through the market, money becomes an important instrument for facilitating these exchanges. Economic exchanges without the mediation of money are referred to as barter exchanges.
However, they presume the rather improbable double coincidence of wants. Consider, for example, an individual who has a surplus of rice that she wishes to exchange for clothing. If she is not lucky enough she may not be able to find another person who has the diametrically opposite demand for rice with a surplus of clothing to offer in exchange.
Microeconomics Practice Paper
Q.1 What is the important work of money?
(A) Store of Value
(B) Medium of exchange
(C) Transfer of Value
(D) Standard of deferred Payments
ANS. Option (B) Medium of exchange
Q.2 Where is not the role of money?
(A) Cannot be any exchange
(B) Family living on an isolated island
(C) (A) and (B) Both
(D) None of the above
ANS. Option(C)- (A) and (B) Both
Q.3 What is Barter System?
(A) Exchange of a commodity for money
(B) Exchange of a commodity for commodity
(C) Transfer of Value
(D) None of the above
ANS. Option (B) Exchange of a commodity for commodity
Q.4 Who satisfies double coincidence of wants?
(A) Exchange of a commodity for money
(B) Exchange of a commodity for commodity
(C) Transfer of Value
(D) None of the above
ANS. Option (A) Exchange of a commodity for money
Q.5 As soon as there is ———————- one economic agent who engage themselves in transactions through the market. Fill in the Blank from the following option.
(A) More than
(B) Less than
(C) Equal to
(D) None of the above
ANS. Option A) More than
Q.6 What is the defect of the barter system?
(A) Lack of double coincidence of wants
(B) Difficulty in the measurement of value
(C) Difficulty in store of value
(D) All of these
ANS. Option (D) All of these
Q.7 Which among the following is the near money?
(A) Bonds
(B) Insurance policy
(C) Securities
(D) All of these
ANS. Option (D) All of these
Q.8 Which of the following is the function of a commercial bank?
(A) Accepting deposits
(B) Credit creation
(C) Agency function
(D) All of these
ANS. Option (D) All of these
Q.9 Which is the most liquid measure of the money supply?
(A) M4
(B) M3
(C) M2
(D) M1
ANS. Option (D) M1
Q10. An annual statement of the estimated receipts and expenditure of the government over the fiscal year is known as
(A) Budget
(B) Income estimates
(C) The Government Account
(D) Expenditure
Ans. Option A
Q11. Which of the following is an example of direct tax?
(A) VAT
(B) Excise duty
(C) Entertainment tax
(D) Wealth tax
Ans. Option D
Q12. When government spends more than it collects by way of revenue, it incurs ______
(A) Budget surplus
(B) Budget deficit
(C) Capital expenditure
(D) Revenue expenditure
Ans. Option B
Q13. Which of the following is the component of a budget?
(A) Fiscal budget
(B) Capital budget
(C) Both of these
(D) None of these
Ans. Option C
Case [ Q14 – 17] Read the following case study carefully and answer the question given below.
One of the most distressing years by far, 2020 marked the year of a deadly pandemic that drastically impacted health, businesses, and communities across the globe. The Indian economy also got battered due to the subsequent lockdown which exposed gaps in the supply chain and delays in working around the social distancing norms. Critical indicators such as de-growth in the economy, contraction in GDP, widening of fiscal deficit, and high inflation have highlighted the severe strike on the economy in the past year.
But as it is said, ‘There is hope after despair and many suns after darkness’, similarly, the Indian economy has started showing signs of recovery. Faced with the daunting twin tasks of pulling back the economy from the clutches of de-growth, a slew of fiscal and non-fiscal measures were taken during the year to rebound the economy from the aftermath of the pandemic. This is evidenced by the pre-budget Economic Survey’s projection of 11% growth in real GDP for 2021.
Laying a vision for AtmaNirbhar Bharat, the Hon’ble Finance Minister has rested the budget proposals on six pillars – health and wellbeing, physical and financial capital and infrastructure, inclusive development for aspirational India, reinvigorating human capital, innovation, and R&D, and minimum government – maximum governance.
Overall, against the backdrop of the fiscal constraints within which the Finance Minister had to operate, the measures announced seem to be in the right direction. These measures may accelerate overall growth along with healthcare development, consumption surge, and provide support to infrastructure developments if implemented in the time to come.
Macroeconomics Practice Paper
Q14. The substantial rise in prices is called:
A. Inflation
B. Deflation
C. Both A and B
D.None of these
Ans. Option A
Q15. ‘Atmanirbhar Bharat Abhiyaan’ support the Indian Economy to fight against
A. COVID-19
B. Terrorism
C. Both A and B
D. None of these
Ans. A
Q16. Option The fiscal deficit is shown:
A. Excess of expenditure over receipts
B. Excess of receipts over expenditure
C. Expenditure equal to receipts
D. None of these
Ans. Option A
Q17. The difference between real GDP and nominal GDP is the adjustment for
A. Deflation
B. Inflation
C. Both A and B
D. None of these
Ans. Option B
Case. [Q18 – Q22] India’s current account balance posted a marginal surplus of USD 0.6 billion (0.1% of GDP) in the Jan-Mar quarter 2020, as against a deficit of USD 4.7 billion in Jan-Mar 2019 and USD 2.6 billion in the previous quarter. It is noteworthy that this is the first quarterly current account surplus since the Jan-Mar quarter of 2007. It is primarily on account of a lower trade deficit at USD 35 billion and a rise in net invisible receipts (which includes services, primary and secondary income) at USD 35.6 billion.
The lower trade deficit is a result of the sharp decline in demand at both the national and international levels following the implementation of COVID-19 lockdowns and a fall in global crude oil prices since the beginning of this year. In the financial account, net foreign direct investment at USD 12 billion was higher than USD 6.4 billion in the Jan-March quarter of 2019.
On the portfolio investment side, there was a net outflow of USD 13.7 billion compared to USD 9.4 billion inflow the same quarter last year on account of money being pulled out from both debt and equity markets. A surplus at both current and capital accounts has resulted in a forex reserve accretion of USD 18.8 billion in the Jan-Mar quarter of 2020.
Macroeconomics Practice Paper
Questions:
18. Current Account of BOP account records only exports and imports of Goods and Services. (True/ False)
ANS. False: It also records unilateral receipts and payments
19. Current Account Surplus arises when credit items are____________ debit items
(a) Less than
(b) Equal to
(c) More than
(d) All the above
ANS. Option (C) More than
20. Foreign Direct Investment from abroad are recorded on the:
(a)Credit side of Current Account
(b) Debit side of Current Account
(c) Credit side of Capital Account
(d) Debit side of Capital Account
ANS. (C) Credit side of Capital Account
21. Current Account is a ____________(Stock/ Flow) concept.
ANS. Option Flow
22. BoP is measured as:
(a) difference between visible items of exports and imports
(b) difference between invisible items of exports and imports
(c) difference between the external and internal flow of gold
(d) difference between all receipts of foreign exchange and payments of foreign exchange
ANS. Option (d) difference between all receipts of foreign exchange and payments of foreign exchange
23. Balance of trade is measured as:
(a) difference between import and export of goods
(b) difference between import and export of services
(c) difference between import and export of capital
(d) difference between all exports and all imports
ANS. Option (a) difference between import and export of goods
24. In which of the following categories are the transactions of the balance of trade recorded?
(a) Visible items
(b) Invisible items
(c) Capital transfers
(d) All of these
ANS. Option (a) Visible items
25. Current account records transactions relating to:
(a) export and import of goods
(b) non-factor and factor income
(c) current transfers
(d) all of these
ANS. Option (d) all of these