Why does the demand for foreign currency fall and supply rises w

Subject

Economics

Class

CBSE Class 12

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Sample Papers

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 Multiple Choice QuestionsShort Answer Type

21.

Distinguish between final goods and intermediate goods. Give an example of each.

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22.

Explain the store of value function of money.
Or
State the meaning and components of money supply.

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23.

Explain the basis of classifying taxes into direct and indirect tax. Give examples

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24.

Explain ‘banker to the government’ function of the central bank.
Or
Explain the role of reverse repo rate in controlling money supply.

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25.

Explain how government budget can be used to influence distribution of income ?

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26.

An economy is in equilibrium. From the following data about an economy calculate autonomous consumption.
(i) Income = 5000
(ii) Marginal propensity to save = 0.2
(iii) Investment expenditure = 800

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27.

Why does the demand for foreign currency fall and supply rises when its price rises ? Explain.


The demand for foreign currency fall and supply rises when its price rises because domestic goods become cheaper. It induces the foreign currency to increase their imports from the domestic country. When the price of the foreign currency increases, this implies that the domestic currency has increased in terms of the foreign currency.in other words, it means that the domestic currency has depreciated.

For example, if price of 1US dollar rises from Rs 53 to Rs 59, it implies that exports to US will increase as Indian goods will become relatively cheaper. It will raise the supply of US dollars.

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 Multiple Choice QuestionsLong Answer Type

28.

Explain ‘non-monetary exchanges’ as a limitation of using gross domestic product as an index of welfare of a country.
Or
How will you treat the following while estimating domestic product of a country ? Give reasons for your answer :
(a) Profits earned by branches of country’s bank in other countries
(b) Gifts given by an employer to his employees on independence day
(c) Purchase of goods by foreign tourists

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29.

Calculate (a) net domestic product at factor cost and (b) gross national disposable income :

s. no.   in RS
1 Private final consumption expenditure 8000
2 Government final consumption expenditure 1000
3 exports 70
4 imports 120
5 Consumption of fixed capital 60
6 Gross domestic fixed capital formation 500
7 change in stock 100
8 Factor income to abroad 40
9 Factor income from abroad 90 
10 indirect taxes 700
11 subsidies 50
12 Net current transfers to abroad (-)30
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30.

Assuming that increase in investment is Rs. 1000 crore and marginal propensity to consume is 0.9, explain the working of multiplier.

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