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Posted By: Kenny Member Level: Gold Posted Date: 22 May 2008
|
2004 ICFAI University M.B.A Economics (MB141) : October 2004 Question paper
1
Question Paper
Economics (MB141) : October 2004
• Answer all questions.
• Marks are indicated against each question.
1. Which of the following circumstances refers to a mixed economy?
(a) Prices are fixed by the Government
(b) Government plays the pivotal role in the functioning of the economy
(c) Prices are automatically fixed only by the market forces
(d) Government exercises its power only in the important sectors while in the other sectors a free
market economy exists
(e) Prices are only fixed by the farmers.
(1 mark)
< Answer >
2. Market equilibrium occurs, when
(a) Demand is greater than supply
(b) Quantity demanded equals quantity supplied
(c) The price, sellers ask for goods is less than the price consumers pay for those goods
(d) A shortage exists
(e) Demand is less than supply.
(1 mark)
< Answer >
3. The demand curve is usually
(a) Downward sloping from left to right (b) Upward sloping from right to left
(c) Concave to the origin (d) Horizontal
(e) Vertical.
(1 mark)
< Answer >
4. The cross-elasticity of demand is measured as
(a) Percentage change in the quantity of a commodity demanded divided by the percentage change in
the price of that commodity
(b) Percentage change in the price of commodity X divided by percentage change in the quantity
demanded of commodity Y
(c) Percentage change in quantity demanded of commodity X divided by percentage change in the
price of commodity Y
(d) Percentage change in quantity demanded of commodity X divided by percentage change in
quantity demanded of commodity Y
(e) Percentage change in the quantity of a commodity demanded divided by the percentage change in
the income.
(1 mark)
< Answer >
5. You can buy any amount of rice at Rs.15 per kg in the local market. The supply curve for rice is
(a) Vertical (b) Downward sloping
(c) Horizontal (d) Upward sloping (e) Data insufficient.
(1 mark)
< Answer >
6. The demand curve shows the relationship between the price of a good and the quantity demanded of
that good, other thing being constant. The ‘other things’ being held constant include all of the following
except
(a) Income (b) Prices of complementary goods
(c) The price of the good (d) Prices of substitute goods
(e) Consumer tastes.
(1 mark)
< Answer >
7. A curve drawn indicating the slope of the total utility curve closely resembles the
(a) Demand curve (b) Supply curve
< Answer >
2
(c) Average utility curve (d) Marginal revenue curve
(e) Indifference curve.
(1 mark)
8. A consumer cannot go beyond the price line, because
(a) He has no sufficient income
(b) He has no taste for other combination of commodities
(c) He is restricted to certain custom of the society
(d) He has no information about the availability of other combinations
(e) The price of the commodity decreases.
(1 mark)
< Answer >
9. ‘Utility’ is expressed as
(a) The power of commodity to satisfy wants (b) The quality of a commodity
(c) The quantity of a commodity (d) The desire for a commodity
(e) The durability of a commodity.
(1 mark)
< Answer >
10. Isoquants are convex to the origin. This is possible because
(a) Money outlay of the entrepreneur is constant
(b) Marginal rate of technical substitution between labor (L) and capital (K) is decreasing
(c) It is not possible to have infinite number of combinations of two outputs
(d) Both (a) and (b) above
(e) (a), (b) and (c) above.
(1 mark)
< Answer >
11. When a proportional change in input combination caused the same proportionate change in output, the
returns to scale is said to exhibit
(a) Increasing returns (b) Decreasing returns
(c) Constant returns (d) Negative returns (e) Law of variable proportion.
(1 mark)
< Answer >
12. Which of the following is not an example of a firm’s explicit cost?
(a) Salaries paid to workers
(b) An amount of Rs.500 paid to an employee towards the reimbursement of medical expenses
incurred by him
(c) Advertisement expenditure incurred by the firm towards promotion of its branded good, ‘Atoka’
(d) The firm’s owner has given up a job, where he was earning Rs.10,000 per month, to run the firm
(e) Payment of telephone bills by the firm.
(1 mark)
< Answer >
13. Which of the following is true with respect to marginal cost?
(a) Total variable cost of an output
(b) Total fixed cost per unit of output
(c) Change in the total cost on account of an additional unit of output
(d) Cost that varies with the output level
(e) Cost of all inputs.
(1 mark)
< Answer >
14. The cost curves of a firm are derived from the
(a) Demand curve of the commodity (b) Price of the output
(c) Production functions of the firm (d) Marginal utility of the consumer
(e) Budget line.
(1 mark)
< Answer >
15. The marginal revenue product is
(a) The selling price of the last unit of output
(b) The incremental total revenue resulting from the use of an additional unit of input
< Answer >
3
(c) Used in determining marginal physical product
(d) Harder to determine in pure competition than in oligopoly
(e) Harder to determine in pure competition than in monopoly.
(1 mark)
16. Average revenue is
(a) Per unit revenue received from all the units of the output sold
(b) Revenue earned by the average size of the product
(c) Revenue earned by all the units of the output
(d) Revenue earned by the average sized firm in the industry
(e) Net addition made to the total revenue by selling one more unit of a commodity.
(1 mark)
< Answer >
17. In a perfectly competitive market, the marginal revenue curve
(a) Slopes downward (b) Slopes upward
(c) Is vertical (d) Is horizontal (e) Is absent.
(1 mark)
< Answer >
18. Which of the following is true of a perfectly competitive firm in equilibrium?
(a) P = MR = MC (b) P = MR, but MR > MC
(c) P = MC, but MR < MC (d) MR = MC and P < MR
(e) MR = MC and P > MR.
(Where, P = Price, MR = Marginal revenue, MC = Marginal cost).
(1 mark)
< Answer >
19. Which of the following is not true with respect to a perfectly competitive market?
(a) There are many sellers in the market
(b) Individual firms are price makers
(c) Products sold by the firms are identical
(d) Anyone can enter or exit the industry without difficulty
(e) Buyers and sellers have perfect information about the market.
(1 mark)
< Answer >
20. Which of the following industries most closely approximates to the perfect competitive model?
(a) Automobile (b) Cigarette (c) Newspaper
(d) Wheat farming (e) Home appliances.
(1 mark)
< Answer >
21. Which of the following reasons does not lead to a monopoly?
(a) Ownership of strategic raw material (b) Existence of numerous buyers
(c) Possession of patent rights for a product (d) Technological advantages
(e) Government licensing.
(1 mark)
< Answer >
22. Which of the following situation does not lead to Price discrimination?
(a) Nature of the good (b) Preference of the buyer
(c) Distance (d) Differences in elasticity of demand
(e) Difference in elasticity of supply.
(1 mark)
< Answer >
23. A monopoly aiming to maximize profit in the short run will
(a) Increase output and raise price
(b) Increase output and reduce price
(c) Reduce output and increase advertisement expenditure
(d) Produce an output where marginal cost is equal to marginal revenue
(e) Produce an output where average revenue is greater than marginal cost.
(1 mark)
< Answer >
4
24. In monopolistic competition, marginal revenue is
(a) Less than price (b) Equal to price
(c) Greater than price (d) Always greater than zero
(e) Always less than zero.
(1 mark)
< Answer >
25. Which of the following is not a predominant feature of the oligopolistic market?
(a) Group behaviour (b) Few firms supply entire market
(c) Interdependence of firms (d) Free entry and exit of firms
(e) Some firms have a large share and can influence the price.
(1 mark)
< Answer >
26. Which of the following is a stock variable?
(a) Gross Domestic Product (b) Inventory of a firm
(c) Inflation (d) Exports
(e) Investment.
(1 mark)
< Answer >
27. The net factor income earned within the domestic territory of a country must be equal to
(a) Net Domestic Product at factor cost
(b) Net Domestic Product at market price
(c) Net National product at factor cost
(d) Net National Product at market price
(e) Personal income.
(1 mark)
< Answer >
28. The difference between personal disposable income and personal income is
(a) Residential investment (b) Indirect taxes
(c) Subsidies (d) Transfer payments
(e) Personal taxes.
(1 mark)
< Answer >
29. Which of the following is/are included in the aggregate demand of an economy?
(a) Consumption demand (b) Investment demand
(c) Net exports (d) Both (a) and (b) above
(e) (a), (b) and (c) above.
(1 mark)
< Answer >
30. Consumption demand does not depend upon the level of
(a) Income (b) Propensity to consume
(c) Propensity to save (d) Wealth
(e) Marginal efficiency of investment.
(1 mark)
< Answer >
31. According to the classical theory, the aggregate supply curve is
(a) Vertical (b) Horizontal
(c) First horizontal and then vertical (d) First vertical and then horizontal
(e) Positively sloped.
(1 mark)
< Answer >
32. An important difference between the approaches of the Classical economists and Keynesian economists
to achieve a macroeconomic equilibrium is that
(a) Keynesian economists actively promote the use of fiscal policy while the classical economists do
not
(b) Keynesian economists actively promote the use of monetary policy to improve aggregate
economic performance while classical economists do not
(c) Classical economists believe that monetary policy will certainly affect the level of output while
< Answer >
5
Keynesians believe that money growth affects only prices
(d) Classical economists believe that fiscal policy is an effective tool for achieving economic stability
while Keynesians do not
(e) Keynesian economists advocate rational expectations while classical economists do not.
(1 mark)
33. Supply of goods creates its own demand. This is according to the
(a) Consumption function (b) Production possibility frontier
(c) Aggregate demand function (d) Says law (e) Keynesian theory.
(1 mark)
< Answer >
34. “Bank rate” is
(a) The rate at which the Central Bank discounts the government bills
(b) The rate at which the Central Bank discounts the eligible bills of commercial banks
(c) The rate at which the Commercial banks give loans to other commercial banks
(d) The rate at which the Commercial banks lend to the public
(e) The rate at which the Central Bank discounts the foreign bills.
(1 mark)
< Answer >
35. In a deflationary period, the appropriate policy for the RBI would be to
(a) Buy government securities in the open market
(b) Discourage commercial banks to increase their loans
(c) Increase Cash Reserve Ratio
(d) Increase bank rate
(e) Reduce the credit to government.
(1 mark)
< Answer >
36. Which of the following refers to the instruments of monetary policy?
(a) Open market operations (b) Deficit financing
(c) Collection of taxes (d) Automatic stabilizers
(e) Public expenditure.
(1 mark)
< Answer >
37. Other things being equal, when the RBI raises the reserve requirement
(a) The money supply tends to fall (b) Bank reserves tend to expand
(c) Bank lending tends to increase
(d) The money supply is not affected (e) The price level tends to increase.
(1 mark)
< Answer >
38. Which of the following is responsible for formulating and implementing monetary policy in India?
(a) Central Government (b) State Government
(c) Reserve Bank of India (d) International Monetary Fund
(e) Finance Commission.
(1 mark)
< Answer >
39. When the inflation reaches double or triple digits, it is called
(a) Creeping inflation (b) Galloping inflation
(c) Running inflation (d) Disinflation (e) Deflation.
(1 mark)
< Answer >
40. Inflation is the increase in the general _____. which is sustained over a period of time.
(a) Price level (b) Money supply (c) Unemployment (d) Investment
(e) Production.
(1 mark)
< Answer >
41. Which of the following is / are the objectives for the use of fiscal policies?
(a) Attaining full employment (b) Stable prices in the economy
(c) Widening tax base (d) Both (a) and (b) above
< Answer >
6
(e) (a), (b) and (c) above.
(1 mark)
42. Expansionary fiscal policy refers to
(a) Increase in government spending and increase in money supply
(b) Increase in government spending and decrease in taxes
(c) Decrease in government spending and decrease in money supply
(d) Decrease in government spending and increase in taxes
(e) Increase in government spending and increase in taxes.
(1 mark)
< Answer >
43. Which of the following refers to the instruments of fiscal policy?
(a) Bank rate (b) Open market operations
(c) Cash reserve requirements (d) Levy of taxes (e) Rationing of credit.
(1 mark)
< Answer >
44. Automatic stabilizers refer to
(a) Inherent mechanisms in the stock market that automatically cause stock market gains to be
cancelled out by losses, which make expected long-run returns equal to zero
(b) The invisible hand mechanisms which automatically bring the economy out of a recession
(c) Government revenue and expenditure items that change automatically in response to changes in
economic activity
(d) Discretionary monetary policy maneuvers designed to keep inflation under control automatically
(e) Monetary policy that aims at stabilizing interest rates in the economy.
(1 mark)
< Answer >
45. Large government borrowings to finance its deficit will
(a) Increase the supply of loanable funds
(b) Exert downward pressure on interest rates
(c) Have no impact on interest rates
(d) Put upward pressure on interest rates
(e) Makes it easier for the commercial sector to borrow money.
(1 mark)
< Answer >
46. Which of the following is a liability for a commercial bank?
(a) Reserves with the RBI (b) Loans to PSUs
(c) Credit to the Central Government (d) Deposits from the public
(e) Discounted commercial bills.
(1 mark)
< Answer >
47. In balance of payments statement, short term inflows and outflows of investments are recorded in
(a) Current account (b) Capital account
(c) Official reserves account (d) Errors and omissions account
(e) Transfer payments account.
(1 mark)
< Answer >
48. The balance of payments is divided into
(a) Current account and the trade account
(b) Trade account and the capital account
(c) Current account and the capital account
(d) Current account and the reserve account
(e) Reserve account and the savings account.
(1 mark)
< Answer >
49. In which sector of Indian economy do we find a high rate of disguised unemployment?
(a) Service sector (b) Transport sector
(c) Agriculture sector (d) Manufacture sector
(e) Mining sector.
< Answer >
7
(1 mark)
50. The business cycle is defined as
(a) The annual cycle of output
(b) The long run path after removing short run variations
(c) The variation in the economic activity with a regular pattern
(d) The change in the gross domestic product of a country
(e) The change in inflation in a year for a country.
(1 mark)
< Answer >
51. The demand and supply functions of a good are
Qs = 400 + 15P
Qd = 600 – 10P
If the government fixes a price ceiling of Rs.12 for the product, there would be
(a) No supply of the good (b) Shortage of the good
(c) Excess supply of the good (d) Excess demand for the good
(e) No effect on demand and supply.
(2 marks)
< Answer >
52. The total market demand for a product is given by the equation Qd = 400 – 25P. The supply is
represented by the function Qs = 200 + 25P. The free market equilibrium quantity is
(a) 600 units (b) 500 units (c) 400 units (d) 300 units
(e) 200 units.
(1 mark)
< Answer >
53. Demand for Beynolds pens in Hyderabad decreases to 25 units from 75 units because of increase in its
price from Rs.6 to Rs.12. It implies that the point price elasticity of demand for Beynolds in Hyderabad
is
(a) 0.16 (b) 0.23 (c) 0.54 (d) 0.44 (e) 0.67.
(2 marks)
< Answer >
54. The demand and supply functions of a good are
Demand function : P = 104 – 4Q
Supply function : P = 2 + 0.5Q
(Where, P = price of the good and Q = quantity of goods)
If the price of the good is Rs.20, the surplus/shortage of goods in the market is
(a) 15 units (surplus) (b) 15 units (shortage)
(c) 20 units (surplus) (d) 20 units (shortage)
(e) 12 units (surplus).
(1 mark)
< Answer >
55. For a consumer in equilibrium, Marginal Rate of Substitution of X for Y (MRSxy) is 3. If price of the
good X (Px) is Rs.75, price of good Y (Py) is
(a) Rs. 15 (b) Rs. 25 (c) Rs. 75
(d) Rs.125 (e) Rs.150.
(1 mark)
< Answer >
56. Marginal utility of good X is 300 utils and its price is Rs.12. If price of good Y is Rs.30, the marginal
utility of good Y at equilibrium is
(a) 350 utils (b) 700 utils (c) 750 utils (d) 550 utils (e) 600 utils.
(1 mark)
< Answer >
57. Average productivity of labor (APL) for a firm is 15 when labor employed is 100 units. When labor
employed increased to 101 units, APL decreases to 14 units. Marginal productivity of 101th unit of labor
is
(a) –1 unit (b) –100 units
< Answer >
8
(c) 1 unit (d) 86 units (e) – 86 units.
(1 mark)
58. The Production function of a manufacturing unit, using only labor (L) as inputs in the production
process, is estimated to be Q = 100 L2 – L3. The labor input at which the firm can maximize average
productivity of labor is
(a) 25.0 units (b) 37.5 units (c) 50.0 units (d) 62.5 units
(e) 75.0 units.
(2 marks)
< Answer >
59. MRTSL,K for the production function, Q = 10K0.5L0.5 is
(a) 0.5 K/L (b) 0.5 L/K (c) K/L (d) L/K (e) 0.5+K/L.
(2 marks)
< Answer >
60. Consider the following Total Cost function
TC = 1,000 + 200Q – 9Q2 + 0.25Q3
Which of the following statements is true?
(a) The average variable cost function is
1000
Q + 200 - 9Q + 0.25Q2
(b) Total Fixed cost is Rs.1,200
(c) Marginal cost function is 200 – 9Q + 0.25Q2
(d) Total variable cost function is 200Q – 9Q2 + 0.25Q3
(e) Average fixed cost is Rs.5.
(1 mark)
< Answer >
61. The total cost (TC) schedule of a firm is given as follows.
Output
(Units)
TC
(Rs.)
1 100
2 150
3 190
4 250
5 340
Marginal cost of the third unit is
(a) Rs.30 (b) Rs.40 (c) Rs.150 (d) Rs.60 (e) Rs.190.
(1 mark)
< Answer >
62. Marginal cost (MC) schedule of a firm is given as follows.
Output
(units)
MC
(Rs.)
1 100
2 50
3 40
4 60
5 90
If the firm is producing only 4 units of output, the total cost will be
(a) Rs. 60 (b) Rs. 100 (c) Rs. 150 (d) Rs. 250 (e) Rs. 340.
(1 mark)
< Answer >
63.
If the average cost function of a firm is estimated to be AC =
500
Q + 10 + 5Q + 25Q2, the fixed cost of
the firm will be
(a) Rs.10 (b) Rs.500 (c) Rs.5 (d) Rs.25 (e) Rs.1,000.
(1 mark)
< Answer >
64. For a firm, the average cost function is estimated as < Answer >
9
AC =
100
Q + 20 + 4Q
What is total variable cost for the firm at an output of 15 units?
(a) Rs.100 (b) Rs.750
(c) Rs.1,200 (d) Rs.1,340 (e) Rs.2,100.
(1 mark)
65. The total revenue and total cost functions of Nike Shoe Company are
TR = 400Q –
Q2
2 , TC = 600 +70Q + Q2
What is the profit maximizing output for the firm?
(a)100 units (b) 110 units (c) 140 units (d) 180 units
(e) 200 units.
(2 marks)
< Answer >
66. The cost and profit functions of a firm are
TC = 200 + 10Q
Profit = –10Q2 + 200Q – 200
If the firm aims at maximizing total revenue, the output should be
(a) 10.0 units (b) 9.5 units (c) 10.5 units (d) 6.3 units
(e) 19.0 units.
(2 marks)
< Answer >
67. Demand functions of a monopolist in two effectively segmented markets are:
Qa = 1,000 – 50Pa
Qb = 800 – 25Pb
Total cost function of the monopolist is TC = 500 + 10Q.
If the monopolist does not practice price discrimination, sales maximizing price is
(a) Rs.17 (b) Rs.900 (c) Rs.12 (d) Rs.525 (e) Rs.15.
(2 marks)
< Answer >
68. A monopoly firm has the total cost function as TC = 500 + 20Q2. The demand function is P = 400 –
20Q. The profit maximizing output is
(a) 10 units (b) 8 units (c) 6 units (d) 5 units (e) 4 units.
(1 mark)
< Answer >
69. The following information is given from the national income accounts for a country in the year 2003-
04:
Particulars Rs. crore
GNP at factor cost 2,40,000
Depreciation 20,000
Subsidies 12,000
Net factor income from abroad 10,000
Indirect taxes 36,000
What is the NDP at factor cost?
(a) Rs.2,10,000 crore (b) Rs.2,00,000 crore
(c) Rs.1,90,000 crore (d) Rs.1,80,000 crore (e) Rs.2,58,000 crore.
(2 marks)
< Answer >
70. Given the following information, what would be the national income of the economy?
Particulars Million units of currency (MUC)
Compensation to employees 2,325
< Answer >
10
Compensation to employees 2,325
Interest payments made by the firms 323
Rental income received 43
Corporate profits (before tax) 170
Proprietors’ income 135
Personal taxes paid by the individuals 260
(a) 2,786 MUC (b) 2,996 MUC (c) 2,886 MUC (d) 3,115 MUC
(e) 2,662 MUC.
(2 marks)
71. The following data is taken from National Income Accounts of a country:
Particulars Rs. Cr.
GNP at market prices 1,700
Transfer payments 242
Indirect taxes 173
Personal taxes 203
Consumption of capital 190
Undistributed corporate profits 28
Corporate tax 75
Subsidies 20
Personal income in the country is
(a) Rs.1,363 cr (b) Rs.1,121 cr (c) Rs.1,230 cr (d) Rs.1,296 cr
(e) Rs.1,496 cr.
(2 marks)
< Answer >
72. The following information is extracted from the National Income Accounts of an economy.
Particulars MUC
Depreciation 236
Government expenditure 1,188
Corporate taxes 288
Gross domestic investment 1,278
Transfer payments 278
Personal taxes 810
Net income earned from abroad 44
Retained earnings 600
If the national income is 10,000 MUC, the personal disposable income in the economy would be
(a) 8,960 MUC (b) 8,580 MUC (c) 10,240 MUC (d) 9,230 MUC
(e) 7,440 MUC.
(2 marks)
< Answer >
73. Consider the following information.
Disposable income
(Rs.)
Consumption (Rs.)
2,000 2,700
4,000 4,100
6,000 5,500
8,000 6,900
10,000 8,300
What is the marginal propensity to consume?
(a) 0.60 (b) 0.65 (c) 0.70 (d) 0.75 (e) 0.80.
(1 mark)
< Answer >
74. Consider the following information for a country called ‘Dream Land’.
Autonomous consumption : 100 MUC
Marginal propensity to consume : 0.75
Planned investment : 50 MUC
< Answer >
11
Government purchases : 150 MUC
Net Exports : 20 MUC
The equilibrium level of output for ‘Dream Land’ is
(a) 80 MUC (b) 183 MUC (c) 427 MUC (d) 880 MUC
(e) 1280 MUC.
(2 marks)
75. If MPC is 0.75 the multiplier is
(a) 0.75 (b) 1.33 (c) 4.00 (d) 7.50 (e) 0.25.
(1 mark)
< Answer >
76. In a two-sector economy, the savings function is estimated to be S = – 20 + 0.30Yd.
If the equilibrium output is 600, the level of investment in the economy is
(a) 140 MUC (b) 150 MUC (c) 160 MUC (d) 130 MUC
(e) 170 MUC.
(2 marks)
< Answer >
77. MPC for an economy is estimated to be 0.75. Beginning from a position of equilibrium, investment
rises by Rs.100 crore. The change in Y that will bring the economy back to equilibrium is
(a) Rs.100 Cr. (b) Rs. 200 Cr. (c) Rs. 300 Cr. (d) Rs. 400 Cr.
(e) Rs.2,500 Cr.
(1 mark)
< Answer >
78. Assume there is no government or foreign sector. If the MPC is 0.75, a Rs.20 million decrease in
planned investment will cause aggregate output to decrease by
(a) Rs. 15.67 million (b) Rs. 20.00 million
(c) Rs. 26.67 million (d) Rs. 80.00 million (e) Rs. 120.00 million.
(1 mark)
< Answer >
79. The following are the excerpts from the balance sheet of a Central Bank.
Particulars MUC
Notes in circulation 100
Other deposits 50
Other non-monetary liabilities 100
Statutory and contingency reserves 420
Credit to Central Government 1,120
Shares & loans to financial institutions 550
Central bank claims on Commercial banks 350
Net foreign exchange assets 150
Other assets 50
If the government money is 25 MUC, the high powered money in the economy is
(a) 1,650 MUC (b) 1,750 MUC (c) 1,725 MUC (d) 1,825 MUC
(e) 1,850 MUC.
(2 marks)
< Answer >
80. The monetary liabilities of the central bank of an economy are 20,000 MUC. The government money in
the economy is 200 MUC. Currency deposit ratio for the economy is estimated to be 0.2 and reserve
ratio imposed by the central bank is 5 percent. If foreign exchange reserves of the country decline by
200 MUC, what would happen to the money supply?
(a) Decline by 960 MUC (b) Increase by 960 MUC
(c) Decline by 820 MUC (d) Increase by 820 MUC (e) Decline by 480 MUC.
(2 marks)
< Answer >
12
81. The following data is taken from balance sheet of a Central Bank.
Particulars MUC
Net worth 6,000
Credit to government 10,000
Credit to commercial sector 5,000
Government deposits 150
Credit to banks 4,000
Other non-monetary liabilities 3,000
Other deposits with the central bank 50
Other assets 100
The Government money in the economy is 1,050 MUC and Money supply in the economy is 80,000
MUC. If Central Bank imposes a reserve ratio of 10 percent and the currency deposit ratio is estimated
to be 20 percent, Net foreign exchange assets with the Central Bank are
(a) 8,500 MUC (b) 9,000 MUC (c) 9,750 MUC (d) 10,050 MUC (e) 10,000 MUC.
(2 marks)
< Answer >
82. Current account deficit for an economy is 5,000 MUC. If foreign exchange reserves increase by 1,000
MUC for the same period, capital account balance is
(a) 1,000 MUC (b) 4,000 MUC (c) 5,000 MUC (d) 6,000 MUC
(e) 10,000 MUC.
(1 mark)
< Answer >
83 GDP of a country is 8,000 MUC. Value of output produced in domestic country by foreign factors of
production is 200 MUC and value of the output produced by domestic factors of production in foreign
countries is 100 MUC. GNP of the country is
(a) 7,700 MUC (b) 7,800 MUC (c) 7,900 MUC (d) 8,100 MUC (e) 8,200 MUC.
(2 marks)
< Answer >
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