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Some basic concepts of macroeconomics - class-XI

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Two-sector economy consists of _______________.

  1. Households, firms

  2. Firms, Foreign sector

  3. Households, Government

  4. Firms, Government


Correct Option: A
Explanation:

Two sector economy consists of:
a) Household sector: It includes consumers of goods and services. Households are also the owners of the factors of production.
b) Producer sector: It includes all producing units in the economy. For the production of goods and services, the firms purchase factors of production.

Stock variable is defined as a variable which is __________________.

  1. Measured over a period of time

  2. Measured at a particular point of time

  3. Cannot be measured

  4. None of these


Correct Option: B
Explanation:

Stock variable is defined as a variable which is measured at a particular point of time. Stock is not time dimensional. It influences the flow. Example: wealth, capital, etc.

The following statement is true or false? Give reasons.
Final goods include only those goods which are consumed by the households. 

  1. True

  2. False


Correct Option: B
Explanation:

Final goods include those goods which are either consumed by the households or purchased by the producers for investment purposes. 

The following statements true or false? Give reasons.
End-use of the goods categorise the goods as intermediate goods and final goods. 

  1. True

  2. False


Correct Option: A
Explanation:

If the end-use of the good is for further production or resale, then the good Is an intermediate good. However, if the end-use of the good is consumption or investment, then the good is a final good. 

The following statement is true or false? Give reasons.
Butter is only a final product. 

  1. True

  2. False


Correct Option: B
Explanation:

The statement is false because:
It depends on the end use of butter. If butter is purchased by a household, then it Is a final good.
However, if it is purchased by a bakery shop for making cakes, then it is an intermediate good. 

Which of the following is an example of Non-durable good? 

  1. Milk

  2. Bread

  3. Both (a) and (b)

  4. Clothes


Correct Option: C
Explanation:

Milk and Bread are examples of Non-durable good. Non-durable gods are those goods which are used-up in a single act of consumption. Bread and milk are used-up in a single act of consumption. The same milk or bread cannot be used again.

Which of the following is the consumption sector?

  1. Households

  2. Firms

  3. Foreign

  4. Government


Correct Option: A
Explanation:

Household is the consumption sector. Household sector receive goods and services from the producer sector for consumption purpose and thus the household sector can be termed as the consumption sector. Households are also the owners of the factors of production.

Which of the following is not a flow?

  1. Capital

  2. Income

  3. Investment

  4. Depreciation


Correct Option: A
Explanation:

Capital is not a flow. Capital falls under the stock concept since it relates to a point of time. Capital is not time dimensional. Capital is not related to a period of time like flow.

Which of the following is a stock?

  1. Wealth

  2. Saving

  3. Exports

  4. Profits


Correct Option: A
Explanation:

Wealth is a stock. Wealth falls under the stock concept since it relates to a point of time. Wealth is not time dimensional. Wealth is not related to a period of time like flow.

Refrigerator purchased by a confectionery shop is an example of _______________.

  1. Final Good

  2. Intermediate Good

  3. Capital Good

  4. Both (a) and (c)


Correct Option: B
Explanation:

Refrigerator purchased by a confectionery shop is an example of intermediate good since refrigerator is not yet ready for use by the final users. Value is yet to be added. Refrigerator is used as a raw material by a confectionery shop.

Which of the following is a flow?

  1. Deposits in a bank

  2. Capital

  3. Depreciation

  4. Wealth


Correct Option: C
Explanation:

Depreciation is a flow since it is measured over a specified period of time. It is time dimensional as it is generally measured over a year.

Foreign embassies in India are a part of India's _______________.

  1. Economic territory

  2. Geographical territory

  3. Both (a) and (b)

  4. None of the above


Correct Option: B
Explanation:

Foreign embassies in India are a part of India's geographical territory and not economic territory. For example: Embassy of USA in India is a  part of domestic territory of USA and a part of geographical territory of India.

Which of the following is a stock?

  1. Savings

  2. Production

  3. Consumption of fixed capital

  4. Capital


Correct Option: D
Explanation:

Capital is a stock since it is measured at a point of time. Capital is not time dimensional. It is not measured over a specified period of time like flow. Therefore, capital is a stock concept.

Capital formation is a flow concept.

  1. True

  2. False


Correct Option: A
Explanation:

Capital formation is measured over a period of time hence it is a flow concept.

Bread can either be a consumer good or an intermediate good.

  1. True

  2. False


Correct Option: A
Explanation:

The goods which are consumed by a consumer to satisfy his want is known as consumer goods, while goods used in a production process are intermediate goods. Hence, bread can either be a consumer good or an intermediate good based on its use.

The following statements true or false? Give reasons
Intermediate goods have a derived demand, while final goods have direct demand. 

  1. True

  2. False


Correct Option: A
Explanation:

Intermediate goods have a derived demand as their demand depends on demand for final goods.
On the other hand, final goods have a direct demand as they satisfy the wants directly.

The following statements true or false? Give reasons.
A good can be an intermediary good in one case and a final good in another case. 

  1. True

  2. False


Correct Option: A
Explanation:

A good can be an intermediate good as well as a final good, depending upon its nature of use.
For example, a car purchased by a household is a final good, whereas, It will be an intermediate good if it is purchased by a car dealer. 

In a two-sector economy, total production is always equal to total consumption.

  1. True

  2. False


Correct Option: A
Explanation:

Households and firms depend on each other in the circular flow of income in case of a two-sector model. Participants of the two-sector economy are households and producers.  Flow of money from producers to households as payments for the purchase of factor services has been a continuous process. So, there has been the flow of money from households to producers as payments for the purchase of consumer goods and services, This non-stop continuity of inter-sectoral flows is called 'circularity of flows'. Hence, total consumption by households is always equal to total production by the producers.

The following statements true or false? Give reasons.
Both 'Expected Obsolescence' and 'Unexpected Obsolescence' are considered for determining the amount of depreciation.

  1. True

  2. False


Correct Option: B
Explanation:

Both 'Expected Obsolescence' and 'Unexpected Obsolescence' are considered for determining the amount of depreciation- this is a false statement since only expected obsolescence is considered for determining the amount of depreciation. It has two components: loss of value of fixed assets due to change in technology and change in demand.

Which of the following is not an example of flow variable?

  1. Number of births during a year

  2. National wealth

  3. National income

  4. Wheat produced during a year


Correct Option: B
Explanation:

National wealth is not an example of flow variable. It is a stock since it is measured at a point of time. National wealth is not time dimensional. It is not measured over a specified period of time like flow. Therefore, national wealth is a stock concept.

Losses are classified as ______________.

  1. Stock variable

  2. Flow variable

  3. Either a or b

  4. Neither a nor b


Correct Option: B
Explanation:

Losses are classified as a flow variable since it is measured over a specified period of time. It is time dimensional as it is generally measured over a year.

Depreciation means ___________________.

  1. Destruction of a plant in a fire accident

  2. Loss of fixed assets overtime due to wear and tear

  3. Loss of fixed assets in an earthquake

  4. Closure of the plant due to lockout


Correct Option: B
Explanation:

Depreciation means loss of fixed assets overtime due to wear and tear. Depreciation is also called consumption of fixed capital. Loss of fixed assets happen on account of normal wear and tear, normal rate of accidental damages and expected obsolescence.

Final goods refer to those goods which are used either for ______ or for ________.

  1. Consumption, investment

  2. Consumption, resale

  3. Resale, investment

  4. Resale, further production


Correct Option: A
Explanation:

Final goods refer to those goods which are used either for consumption or for investment. Final goods have crossed the boundary of production and are ready for use by their final users. These goods are included in the estimation of national product or national income. Example: Bread and butter used by the consumers.

Net factor income from abroad is ________________.

  1. Exports minus Imports

  2. Visible Exports minus Visible Imports

  3. Factor income received from abroad minus factor income paid abroad

  4. Factor incomes received from abroad


Correct Option: C
Explanation:
Net factor income from abroad is factor income received from abroad minus factor incomes paid abroad.
Equation:
Net factor income from abroad= Factor income earned by our residents from the rest of the world - Factor income earned by non- residents in our domestic territory.

Which of the following is an example of an intermediate goods? 

  1. Car sold by a dealer of second hand cars

  2. Steel and cement used to construct a flyover

  3. Fertilizers purchased by a farmer

  4. All the these


Correct Option: D
Explanation:
All of the following are examples of an intermediate good:
a) Car sold by a dealer of second hand cars: It is an intermediate good since cars are purchased by a dealer as goods for resale.
b) Steel and cement used to construct a flyover: It is an intermediate good since steel and cement are used as a raw material.
c) Fertilizers purchased by a farmer: It is an intermediate good since fertilizers is used as a raw material in agriculture.

Sugar purchased by a Sweet shop is an ______ good, while it is a _______ good when it is purchased by a consumer. 

  1. capital, final

  2. final, intermediate

  3. intermediate, final

  4. final, producer


Correct Option: C
Explanation:

Sugar purchased by a Sweet shop is an intermediate good, while it is a final good when it is purchased by a consumer as sugar purchased by a sweet shop is used as a raw material and goods used for raw material are classified as intermediate goods as value is yet to be added, while, sugar purchased by a consumer is a final good as it is directly consumed and no value is yet to be added.

Depreciation of fixed capital assets refers to _______________.

  1. Normal wear and tear

  2. Foreseen obsolescence

  3. Normal wear & tear & foreseen obsolescence

  4. Unforeseen obsolescence


Correct Option: C
Explanation:

Depreciation of fixed capital assets refers to normal wear and tear and foreseen obsolescence. Depreciation is also called consumption of fixed capital. Loss of fixed assets happen on account of normal wear and tear, normal rate of accidental damages and expected obsolescence.

Goods purchased for the following purpose are final goods ________________.

  1. For satisfaction of wants

  2. For investment in firm

  3. Both (a) and (b)

  4. None of the above


Correct Option: C
Explanation:


Goods purchased for the following purpose are final goods:
a) For satisfaction of wants
b) For investment in firm
Final goods are those goods which crossed the boundary of production and are ready to use by their final users, Final goods must lead to either final consumption expenditure or investment expenditure in the economy.

Unforeseen obsolescence of fixed capital assets during production is ________________.

  1. Consumption of Fixed Capital

  2. Capital Loss

  3. Income Loss

  4. None of the above


Correct Option: B
Explanation:

Unforeseen obsolescence of fixed capital assets during production is capital loss. Unforeseen obsolescence which may happen due to natural calamity is not taken into account while calculating depreciation and hence, it causes capital loss.

Are the following statements true or false? Give reasons.
Increase in stock of goods held by a consumer will contribute to capital formation. 

  1. True

  2. False


Correct Option: B

Change in stock is negative when:

  1. Closing stock $>$ Opening stock

  2. Closing stock $<$ Opening stock

  3. Closing stock $= 0$

  4. Opening stock $= 0$


Correct Option: B

For which of the following States has Centre appointed interlocutors?

  1. HP

  2. J & K

  3. Nagaland

  4. Manipur


Correct Option: B

Capital output ratio refers to __________________.

  1. units of capital required to produce consumer goods

  2. units of capital required to produce output

  3. amount of capital required to instal a capital asset

  4. All the above


Correct Option: B
Explanation:

A frequently used tool that explains the relationship between the level of investment made in the economy and the consequent increase in GDP is the capital-output ratio. The concept of the capital-output ratio expresses the relationship between the value of capital invested and the value of output.

Capital output ratio is the amount of capital needed to produce one unit of output. For example, suppose that investment in an economy, investment is 32% (of GDP), and the economic growth corresponding to this level of investment is 8%.

Here, a Rs 32 investment produces an output of Rs 8. Capital output ratio is 32/8 or 4. In other words, to produce one unit of output, 4 unit of capital is needed. But don’t forget that the Rs 32 invested in the form of machinery will remain there for around ten or twelve years. Such machinery will be giving Rs 1 output in every year.

Hence, B is the correct option.

"BCSBI" stands for _________________.

  1. Banking Codes and Standards Boards of India

  2. Board Code for Standards in Branches

  3. Board Code for Standards in Banking

  4. None of the above


Correct Option: A
Explanation:

The Banking Codes and Standards Board of India (BCSBI) is an independent banking industry watchdog that protects consumers of banking services in India. The board oversee compliance with the "Code of Bank's Commitment to Customers".

The book General Theory of Employment Interest and Money was written by _________.

  1. David Ricardo

  2. Adam Smith

  3. J.M. Keynes

  4. Alfred Marshall


Correct Option: C

_________ supported the principle of balance budget.

  1. Adam Smith

  2. Ricardo

  3. Alfred Marchall

  4. keynes


Correct Option: A

At break even point, consumption  (C) is equal to Income (Y) .

  1. True

  2. False


Correct Option: A

In developing countries the marginal propensity to consume is ______ than underdeveloped countries.

  1. more

  2. less

  3. constant

  4. fluctuating


Correct Option: A

Net exports will be positive if ______.

  1. import > export

  2. export > import

  3. export = import

  4. export = zero


Correct Option: B
Explanation:

Exports refer to the goods and services sold by domestic traders to foreign traders; the revenue thus generated is foreign trade revenue. Imports, on the other hand, refers to the purchases made by the domestic traders from foreign traders; which requires foreign trade payments.
Net exports will be positive when revenue from foreign trade is higher than payments, i.e., exports greater than imports.

Investments made by the government is _____________ investment.

  1. induced

  2. autonomous

  3. gross

  4. unplanned


Correct Option: B

Expected rate of return on investment is called_______ of capital.

  1. marginal efficiency

  2. average efficiency

  3. opportunity cost

  4. rate of interest


Correct Option: A
Explanation:

Marginal efficiency of capital refers to the rate of return that is expected from an additional unit of investment made or capital utilised. The marginal efficiency of capital, thus, precisely represents the expected rate of return on investment.

_______ investment refers to the investment made without reference to income or profit.

  1. Induced

  2. Autonomous

  3. Inventory

  4. Gross


Correct Option: B
Explanation:

Autonomous investment is done without taking into account the income of the investor or the profit that can be generated from investment. This type of investment is majorly done with the objective of public welfare or infrastructure development by the government or public sector.

Net investment refers to expenditure incurred on new capital goods.

  1. True

  2. False


Correct Option: A

Which of the following is an example of an intermediate goods?

  1. A Tata Indica sold by a dealer of second hand cars

  2. Steel and cement used to construct a flyover

  3. Farming crop purchased by FCI

  4. All of the above


Correct Option: B

The value of plant and machinery used and worn out in the manufacturing of goods and services is known as _______.

  1. transfer payment

  2. intermediate goods

  3. depreciation

  4. gross block


Correct Option: C

Which of these is not a final goods?

  1. steel fabricated structure

  2. scholarship paid to meritorious students

  3. milk purchased by a road side tea stall

  4. brick used in construction of temporary shed for the factory


Correct Option: A

 __________ are financial assets which are not a medium of exchange but are a close substitute for a transaction of business. 

  1. Equivalent money

  2. FIAT money

  3. Token money

  4. Near money


Correct Option: D

_______ account for the difference between GNP and NNP.

  1. Indirect taxation

  2. Capital formation

  3. Direct tax

  4. all the three


Correct Option: B

Which of these is not a feature of a Capitalist economy?

  1. Right of private property

  2. Social justice

  3. Profit maximization

  4. Consumer sovereighty


Correct Option: B

Depreciation means __________.

  1. loss of equipment over time due to wear and tear

  2. destruction of plant

  3. closure of plant

  4. none of the above


Correct Option: A

Goods that represent the social prestige are __________.

  1. complimentary goods

  2. conspicuous consumption

  3. ignorance

  4. inferior goods


Correct Option: B

A refrigerator operating in a chemist's shop is an example of ______________.

  1. free good

  2. final good

  3. intermediate good

  4. consumer good


Correct Option: C
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