Macroeconomics Practice Paper
CASE [Q.1 – Q.5] Some countries have made an attempt to move towards an economy that uses less cash and more digital transactions. A cashless society describes an economic state whereby financial transactions are not connected with money in the form of physical banknotes or coins but rather through the transfer of digital information (usually an electronic representation of money) between the transacting parties. In India government has been consistently investing in various reforms for greater financial inclusion. During the last few years’ initiatives such as Jan Dhan accounts, Aadhar enabled payment systems, e-Wallets, National financial Switch (NFS) and others have strengthened the government resolve to go cashless. Today, financial inclusion is seen as a realistic dream because of mobile and smartphone penetration across the country.
Q.1 What is the correct sentence in the following option?
(A) India attempt to move towards an economy that uses less cash with Broad aspects.
(B) India attempts to move towards an economy that uses less cash with Narrow aspects.
(C) India does not attempt to move towards an economy that uses less cash.
(D) None of the above
ANS. B
Q.2 What is the meaning of a cashless society?
(A) Financial transactions are not connected with money in the form of physical banknotes or coins
(B) an electronic representation of money
(C) (A) and (B) Both
(D) None of the above
ANS. C
Q.3 Which of the following is Money proper?
(A) Bonds (B) Time Deposits
(C) Government Securities (D) Currency Notes and Demand Deposits
ANS. D
Q.4 Which is forms of digital money in the following option?
(A) Jan Dhan accounts
(B) Aadhar enabled payment systems
(C) E-Wallets
(D) All of the above
ANS. D
Q.5 In India government has been consistently investing in various reforms for greater ———————-.
Fill in the Blank from the following option.
(A) Financial inclusion
(B) Financial transactions
(C) (A) and (B) Both
(D) None of the above
ANS. A
Q.6 Read the following statements – Assertion (i) and Reason (ii). Choose one of the correct alternatives given below:
Assertion (i): Money also acts as a convenient unit of account.
Reason (ii): The value of all goods and services can be expressed in monetary units.
(A) Both Assertion (i) and Reason (ii) are true and Reason (ii) is the correct explanation of Assertion (i)
(B) Both Assertion (i) and Reason (ii) are true and Reason (ii) is not the correct explanation of Assertion (i)
(C) Assertion (i) is true but Reason (ii) is false.
(D) Assertion (i) is false but Reason (ii) is true
ANS. Option A
Q.7 Read the following statements – Assertion (i) and Reason (ii). Choose one of the correct alternatives given below:
Assertion (i): currency issued by the central bank can be held by the public Known as the Monetary base.
Reason (ii): It consists of coins and paper currency.
(A) Both Assertion (i) and Reason (ii) are true and Reason (ii) is the correct explanation of Assertion (i)
(B) Both Assertion (i) and Reason (ii) are true and Reason (ii) is not the correct explanation of Assertion (i)
(C) Assertion (i) is true but Reason (ii) is false.
(D) Assertion (i) is false but Reason (ii) is true.
ANS. Option A
Q.8 High Powered Money includes:
(A) C + DD + OD
(B) C + R + OD
(C) C + R + TD
(D) C + DD + TD
ANS. B
Q.9 Indian Monetary System is based on ________
(A) Paper Standard
(B) Metallic Standard
(C) Gold Standard
(D) Credit Money Standard
ANS. A
Q.10 Demand deposits include
(A) Saving account deposits and fixed deposits
(B) Saving account deposits and current account deposits
(C) Current account deposits and fixed deposits
(D) All types of deposits
ANS. B
Q11. Read the following statements Assertion (A) and Reason (R). Choose one of the correct alternatives given below.
ASSERTION (A)-The government budget is an annual estimated statement of revenue and expenditure during the coming fiscal year.
REASON (R)- Through the government budget, it tries to reduce the regional variations.
A. Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
B. Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A)
C. Assertion (A) is true, but Reason (R) is false.
D. Assertion (A) is false, but Reason (R) is true.
Ans. Option A Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A)
Q12. Assertion (A): Fiscal deficit is greater than budgetary deficit.
Reason (R): Fiscal deficit is the borrowing from the Reserve Bank of India plus other liabilities of the Government to meet its expenditure.
(a) Both A and R are true and R is the correct explanation of A
(b) Both A and R are true but R is not a correct explanation of A
(c) A is true but R is false
(d) A is false but R is true
Ans. (A)
Q13. The amount collected by the government as taxes and duties is known as _______
(A) Capital receipts
(B) Tax revenue receipts
(C) Non-tax revenue receipts
(D) All of these
Ans. B
Q14. The amount collected by the government in the form of interest, fees, and dividends is known as ________
(A) Tax-revenue receipts
(B) Capital receipts
(C) Non-tax revenue receipts
(D) None of these
Ans. C
Q15. Borrowing in the government budget is:
(A) Revenue deficit
(B) Fiscal deficit
(C) Primary deficit
(D) Deficit in taxes
Ans. B
Case [Q16 – Q19] Read the following case study carefully and answer the question numbers given below.
There is a constitutional requirement in India (Article 112) to present before the Parliament a statement of estimated receipts and expenditures of the government in respect of every financial year which runs from 1 April to 31 March. This ‘Annual Financial Statement’ constitutes the main budget document of the government.
Although the budget document relates to the receipts and expenditure of the government for a particular financial year, the impact of it will be there in subsequent years. There is a need therefore to have two accounts- those that relate to the current financial year only are included in the revenue account (also called revenue budget) and those that concern the assets and liabilities of the government into the capital account (also called a capital budget). In order to understand the accounts, it is important to first understand the objectives of the government budget.
Q16. Revenue budget does not affect:
A. Assets and liabilities
B. Only assets.
C. Both A and B
D. None of these
Ans. A
Q17. Capital expenditure:
A. Either create assets or reduce liabilities
B. Either create liabilities or reduce assets
C. Both A and B
D. None of these
Ans. A
Q18. Which of the following is indirect tax?
A. Income tax
B. Corporate tax
C. Wealth-tax
D. None of these
Ans. D
Q19. Who presents the Union Budget in Parliament?
A. Defence minister
B. Finance minister
C. Home minister
D. Commerce and textile minister
Ans. B
Q20. Assertion (A): Fiscal deficit is greater than budgetary deficit.
Reason (R): Fiscal deficit is the borrowing from the Reserve Bank of India plus other liabilities of the Government to meet its expenditure.
(a) Both A and R are true and R is the correct explanation of A
(b) Both A and R are true but R is not a correct explanation of A
(c) A is true but R is false
(d) A is false but R is true
Ans. (A)
Q21. The amount collected by the government as taxes and duties is known as _______
(A) Capital receipts
(B) Tax revenue receipts
(C) Non-tax revenue receipts
(D) All of these
Ans. B
Q22. The amount collected by the government in the form of interest, fees, and dividends is known as ________
(A) Tax-revenue receipts
(B) Capital receipts
(C) Non-tax revenue receipts
(D) None of these
Ans. C
Q23. Borrowing in the government budget is:
(A) Revenue deficit
(B) Fiscal deficit
(C) Primary deficit
(D) Deficit in taxes
Ans. B
Q24. Assertion (A): (A): Managed Floating Exchange Rate is decided by market forces but remains within a specific range as decided by central banks.
Reason (R): Exchange rate is determined by the forces of demand and supply of foreign exchange, but the Central Bank intervenes to buy or sell foreign currency to moderate the exchange rate fluctuations.
Read the following statements-Assertion (A) and Reason (R), and select the correct alternative in each case.
(a) Both Assertion (A) and Reason (R) are true and Reason. (R) is the correct explanation of Assertion (A).
(b) Both Assertion (A) and Reason (R) are true but Reason (RI is riot the correct explanation of Assertion (A)
(c) Assertion (A) is true but Reason (R) false.
(d) Assertion (A) is false but Reason (R) is true.
ANS. Option (a) Both Assertion (A) and Reason (R) are true and Reason. (R) is the correct explanation of Assertion (A).
CASE [Q25 – Q27] Foreign trade influences Indian aggregate demand in two ways. First, when Indians buy foreign goods, this spending i.e. imports escape as a leakage from the circular flow of income decreasing aggregate demand. Second, our exports to foreigners enter as an injection into the circular flow, increasing aggregate demand for goods produced within the domestic economy. Balance of Payment record the transactions in goods, services, and financial assets between residents of a country with the rest of the world. There are two main accounts in the BOP – the Current Account and Capital Account. The current account is the record of trade in goods and services and transfer payments. The capital account records all International transactions of assets, Eg. Money, stocks, bonds, government debt, etc.
Questions:
Q25. Which of the following is not a component of the current account of Balance of Payment?
(a). Export and import of goods and services
(b) Remittances given by private citizens living abroad
(c) Net International income from the compensation of employees
(d) None of the above
ANS. None of the above
26. Which of the following is not recorded in the Capital Account of Balance of Payments?
(a) Equity capital
(b) Gifts, remittances, and grants
(c) Government aid
(d) Offshore funds
ANS. Gifts, remittances, and grants
27. Which of the following items are included in the current account BOP?
(a) Foreign investment
(b) External borrowing
(c) External assistance
(d) Nonfactor Income
ANS. Non-factor income
28. Which of the following items relate to BoP on capital account?
(a) Foreign investment
(b) Loans
(c) NRI remittances
(d) All of these
ANS. All of These
29. Which of the following are not included in the balance of trade?
(a) Payment of interest and dividend
(b) Expenditure by the tourists
(c) Borrowing from the rest of the world
(d) All of these
ANS. All of These
30. If the value of visible exports exceeds the value of visible imports, the balance relates to:
(a) current account BoP
(b) capital account BoP
(c) balance of trade
(d) None of these
ANS. None of These