Macroeconomics Reason Assertion Questions
REASON ASSERTION QUESTIONS
Choose the correct alternative from the following in each question given below:
(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 and 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
Or
- Both the statements are True
- Both the statement is False
- Statement 1 is True and Statement 2 is false
- Statement 2 is true and Statement 1 is false.
(1) Assertion (A): In an economy, if consumption expenditure is high, the investment multiplier will be below.
Reason (R): The velocity by which money changes hands, determines the growth of an economy.
Ans. Assertion (A) is false but Reason (R) is true.
(2) Assertion (A): During a deflationary gap, actual aggregate demand is more than potential aggregate demand to maintain full employment.
Reason (R): Recession in an economy leads to a fall in demand as compared with supply.
Ans. Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
(3) Assertion(A): A country always tries to balance the BoP i.e, balance in the current account equals balance in the capital account.
Reason(R): Balance BoP indicates stable economics relation with the rest of the world
Ans. Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
(4) Assertion(A): Currency held by the public is a monetary liability of the central bank
Reason(R): Central bank controls credit, whereas commercial banks create credit with the currency held by the public.
Ans. Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
(5) Assertion(A): The currency notes do not carry as much value in I as is denominated, still has general acceptance
Reason(R): Currency notes are backed by a legal promise from the central bank and central government of the country.
Ans. Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
(6) Assertion(A): Higher-income groups have a lower propensity to consume, as compared with lower-income groups.
Reason (R): Consumption expenditure can never be zero even when a person doesn’t have any income.
Ans. Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
(7) Assertion (A): Depreciation of domestic currency leads to improvement in the balance of trade.
Reason (R): When the exchange rate rises, domestic goods become cheaper in the international market.
Ans. Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
(8) Assertion (A): Tax is the main source of government revenue that is used to provide services therefore those who pay tax should not use government services.
Reason (R): Public goods are non-exclusive and non-rival in consumption.
Ans. Assertion (A) is false but Reason (R) is true
(9) Assertion(A): Central bank as a banker to the government, works as a financial adviser.
Reason(R): Government borrows internally from banks and the general public
Ans. Assertion (A) is true but Reason (R) is false.
(10) 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, tries to reduce the regional variations.
Ans. Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
(11) Statement 1: Government initiatives to alleviate poverty are yet to transform the ownership of assets, process of production, and meet the basic amenities of the poor.
Statement 2: Adequate amount of resources have been allocated for poverty alleviation programs.
Ans. Statement 1 is True and Statement 2 is false
(12) Statement 1: ₹ 500 and ₹ 1000 currency notes of the old Mahatma Gandhi series were banned as legal tender money on 8th November 2016.
Statement 2: Demonetization channelized the savings of an individual into the formal financial system.
Ans. Both the statements are True.
(13) Statement 1: Taxation is an effective tool to reduce the inequalities of income.
Statement 2: Deficit budget during deflation helps to maintain price stability in an economy.
Ans. Statement 1 is True and Statement 2 is false.
(14) Assertion (A): Expenditure on Ujjwal Yojana launched by the Government is an example of revenue expenditure.
Reason (R): It is the expenditure that neither creates assets nor reduced liabilities of the Government.
Ans. Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
(15) Assertion (A): Demand deposits include saving account deposits and current account deposits.
Reason (R): Cheque drawn on saving account deposits and current account deposits are payable by banks on demand from the account holder.
Ans. Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
(16) Assertion (A): An Indian buying a UK car company will be recorded on the debit side of the Balance of payments account.
Reason (R): All inflows of foreign exchange are recorded on the debit side of the Balance of payments account.
Ans. Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
(17) Statement 1: A country with a trade surplus cannot have a current account deficit in its Balance of payments.
Statement 2: Current account deficit can arise when the surplus on trade account is less than the deficit on account of services and unilateral transfers.
Ans. Statement 2 is true and Statement 1 is false.
(18) Statement 1: The reserve ratio acts as a limit to money creation by commercial banks.
Statement 2: Value of money multiplier increases with increase in reserve ratio.
Ans. Statement 1 is True and Statement 2 is false.
(19) Assertion (A): Sale of shares of an Indian Company to a Chinese customer is a part of the capital account of Balance of Payments.
Reason (R): Capital account records transactions that affect the asset-liability status of the country in relation to the rest of the world.
Ans. Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
(20) Statement 1: Interest paid on the loan is a revenue expenditure as it reduces the liability of the government.
Statement 2: Expenditure on infrastructure is a capital expenditure because it increases the assets of the government.
Ans. Statement 2 is true and Statement 1 is false.
(21) Statement 1: GST, the biggest tax reform in the country since independence, was introduced to simplify and unify direct tax systems in India.
Statement 2: It is expected that GST will generate additional revenue for the government, reduce tax evasion and create ‘one nation, one tax, and one market’.
Ans. Statement 2 is true and Statement 1 is false.