Explain the effect of appreciation of domestic currency on impor

Subject

Economics

Class

CBSE Class 12

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Sample Papers

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 Multiple Choice QuestionsShort Answer Type

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31.

Explain the effect of appreciation of domestic currency on imports.


When the domestic currency appreciates, demand for imports by the native residents also increases. This is because appreciation of domestic currency implies depreciation of foreign currency. When domestic currency appreciates, imports become cheaper and there by the demand for import increases.
For example, a currency appreciation (fall in the exchange rate) from say, $1= Rs 40 to $1= Rs 38 implies that the goods from abroad become cheaper (that is, it now cost Rs 38 to purchase a commodity worth $1 instead of Rs 40 earlier). This would result in a rise in the demand for the imports.

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32.

Distinguish between balance of trade and balance on current account. 

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33.

Calculate “sales” from the following data: 

S.No Particulars (Rs in lakhs)
(i) Net Value added at factor cost 560
(ii) Depreciation 60
(iii) Change in stock (-) 30
(iv) Intermediate cost 1000
(v) Exports 200
(vi) Indirect taxes 60
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34.

Giving reasons categorize the following into stock and flow:
(i) Capital
(ii) Saving
(iii) Gross domestic product
(iv) Wealth


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35.

Explain the circular flow of income.

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36.

Explain “Banker to the Government” function of the Central Bank. 

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 Multiple Choice QuestionsLong Answer Type

37.

C = 100 + 0.4 Y is the Consumption Function of an economy where C is Consumption Expenditure and Y is National Income. Investment expenditure is 1,100. Calculate
(i) Equilibrium level of National Income.
(ii) Consumption expenditure at equilibrium level of national income.

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38.

Complete the following table: 

Income (Rs) Consumption expenditure (Rs) Marginal Propensity to Save Average Propensity to Save
0 80    
100 140 0.4 -
200 - - 0
- 240 - 0.20
- 260 0.8 0.35
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39.

Calculate National Income from the following data: 

S.No. Particulars (Rs in crores)
(i) Private final consumption expenditure 900
(ii) Profit 100
(iii) Government final consumption expenditure 400
(iv) Net indirect taxes 100
(v) Gross domestic capital formation 250
(vi) Change in stock 50
(vii) Net factor income from abroad (-) 40
(viii) Consumption of fixed capital 20
(ix) Net imports 30
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40.

S.NO.

Particulars

(Rs in Crores)

1

 

2

 

3

 

4

 

5

 

6

 

7

 

 

Gross domestic product at Market price

 

Net current transfers to the rest of the world

Net indirect tax

 

Net factor income to abroad

 

National debt interest

 

Consumption of fixed capital

 

Current transfers from government

2,000

 

(-)200

 

150

 

60

 

70

 

200

 

150

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