Short Answer TypeWhere will sale of machinery to abroad be recorded in the Balance of Payments Accounts? Give reasons.
Sale of machinery to abroad (exports) will be recorded as positive item in the current account of BOP.
Current account refers to an account which records all the transactions relating to export and import of goods and services and unilateral transfers during a given period of time. Current account contains the receipts and payments relating to all the transactions of visible items, invisible items and unilateral transfers. Those transactions that result in a inflow of foreign exchange in the country are recorded as positive items in the current account of BOP. On the other hand, those items that lead to an outflow of foreign exchange from the country are recorded as negative items in the current account of BOP. Therefore, as sale of machinery abroad leads to an inflow of foreign exchange in the country it will be recorded as a positive item in the current account of BOP.
Explain the 'bank of issue' function of the central bank.
Or
Explain 'Government's Bank' function of central bank.
Government of India has recently launched 'Jan-Dhan Yojna' aimed at every household in the country to have at least one bank account. Explain how deposits made under the plan are going to affect national income of the country.
An economy is in equilibrium. Calculate national income from the following:
Autonomous consumption (C) = 100
Marginal propensity to save (S) = 0.2
Investment expenditure (I) = 200
Long Answer TypeA consumer consumes only two goods X and Y both priced at Rs. 3 per unit. If the consumer chooses a combination of these two goods with Marginal Rate of Substitution equal to 3, is the consumer in equilibrium? Give reasons. What will a rational consumer do in this situation? Explain.
Or
A consumer consumes only two goods X and Y whose prices are Rs. 4 and Rs. 5 per unit respectively. If the consumer chooses a combination of the two goods with marginal utility of X equal to 5 and that of Y equal to 4, is the consumer in equilibrium? Give reason. What will a rational consumer do in this situation? Use utility analysis.
Giving reason, explain how the following should be treated in estimation of national income:
(i) Expenditure by a firm on payment of fees to a chartered accountant
(ii) Payment of corporate tax by a firm
(iii) Purchase of refrigerator by a firm for own use
Explain the concept of Inflationary Gap. Explain the role of Repo Rate in reducing this gap.
OR
Explain the concept of Deflationary Gap and the role of 'Open Market Operations' in reducing this gap.
Explain the role the government can play through the budget in influencing allocation of resources.
Calculate National Income and Personal Disposable Income:
| (Rs.crores) | ||
| (i) | Personal tax | 80 |
| (ii) | Private final consumption expenditure | 600 |
| (iii) | Undistributed profits | 30 |
| (iv) | Private income | 650 |
| (v) | Government final consumption expenditure | 100 |
| (vi) | Corporate tax | 50 |
| (vii) | Net domestic fixed capital formation | 70 |
| (viii) | Net indirect tax | 60 |
| (ix) | Depreciation | 14 |
| (x) | Change in stocks | (-) 10 |
| (xi) | Net imports | 20 |
| (xii) | Net factor income to abroad | 10 |
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