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Students get through the TN Board 12th Bio Botany Important Questions Chapter 1 Asexual and Sexual Reproduction in Plants which is useful for their exam preparation.

TN State Board 12th Bio Botany Important Questions Chapter 1 Asexual and Sexual Reproduction in Plants

Very short answer questions

Question 1.
Define asexual reproduction.
Answer:
Asexual reproduction is defined as the phenomenon in which the propagation of own species takes place without the involvement of gametes.

Question 2.
Mention any two methods of asexual reproduction for example.
Answer:

1. Yeast – Budding.
2. Bacteria – Binary fission.

Question 3.
What is meant by epiphyllous buds?
Answer:
In plants like Brydphyllum, the leaf is notched on its margin. The buds that develop on these notches are called epiphyllous buds.

Question 4.
List out two types of layering.
Answer:

1. Mount layering.
2. Air layering.

Question 5.
Define totipotency.
Answer:
Totipotency is defined as a phenomenon in which the genetic ability of a plant cell to produce an entire plant under suitable conditions.

Question 6.
Mention any two disadvantages of the conventional method of plant propagation.
Answer:

1. Viral infected new plants are produced when the infected plants are used as parents.
2. For vegetative propagation, bulky vegetative structures are needed and the storage and handling of these materials become difficult.

Question 7.
Define microsporogenesis.
Answer:
Microsporogenesis is a process in which the formation of haploid microspores is framed from diploid microspore mother cell through meiosis.

Question 8.
What is corpusculum?
Answer:
The corpusculum is a clamp or clip like sticky structure in which the pollinia are attached.

Question 9.
Mention any two allergic reactions due to pollen grains:
Answer:

1. Asthma
2. Bay fever

Question 10.
What is meant by chalaza?
Answer:
Chalaza is the merging part of the nucellus, the integument, and the funicle at the basal region of the ovule.

Question 11.
What is autogamy?
Answer:
The transfer of pollen on the stigma of the same flower is called autogamy. Autogamy is otherwise called self-pollination.

Question 12.
What is meant by herkogamy?
Answer:
Herkogamy is an adaptation in which die essential organs like stamens and stigmas are arranged in such a way that self-pollination becomes impossible. Eg: Hibiscus.

Question 13.
Mention any two birds, that help in pollination.
Answer:

1. Humming birds,
2. Sun birds.

Question 14.
Define fertilization.
Answer:
Fertilization is defined as the process in which the fusion of male and female gamete takes place.

Question 15.
Define porogamy.
Answer:
Porogamy is the process in which the pollen tube enters the ovule through the micropyle.

Short answer questions

Question 1.
List out any three scientists who worked on plant embryology.
Answer:

1. S.C. Maheswari
2. K.V. Krishnamurthy
3. S. Guha.

Question 2.
Mention and three advantages of vegetative reproduction.
Answer:

1. For the propagation of a species, only one individual plant is enough.
2. The progenies are genetically identical.
3. In some plants like Spinifex, vegetative reproduction enables them to spread rapidly.

Question 3.
Explain briefly about approach grafting.
Answer:
In approach grafting, the rooting occurs both in scion and stock, which is grown in a pot. The pot is brought near the scion. A small slice is cut from the stem, which is of the same thickness. The cut surfaces of both stock and scion are brought together and tied with tape in order to hold together. After 1-4 weeks, the plant is detached by cutting the tip of stock and base of the scion and grown in a separate pot.

Question 4.
Explain the term micropropagation.
Answer:
Micropropagation is a method of plant propagation in which the regeneration of a whole plant occurs from a single cell, tissue, or small piece of vegetative structures through tissue culture.

Question 5.
Mention any three functions of the tapetum.
Answer:

1. Tapetum supplies nutrition to the developing microspores.
2. It plays an important role in pollen wall formation.
3. The exine proteins, responsible for rejection reaction are derived from tapetal cells.

Question 6.
Explain pollenkitt with its function.
Answer:
Pollenkitt is a yellow or orange coloured layer contributed by the tapetum. They are made up of carotenoids or flavonoids. It forms an oily, thick viscous coating over pollen surface to attract insects and to protect from damage due to UV radiation.

Question 7.
What are the types of cross-pollination? and Explain.
Answer:
The transfer of pollen on the stigma of another flower is referred as cross-pollination.
Cross-pollination is of two types.

1. Geitonogamy: In this process, the pollen deposits on the stigma of another flower of the same plant. It usually occurs in monoecious plants. Though it is functionally cross-pollination, it is similar to autogamy because the pollen comes from the same plant.
2. Xenogamy: When the transfer of pollen on another flower of a genetically different plant of the same species, it is called xenogamy.

Question 8.
Distinguish monoecious and dioecious plants.
Answer:

Question 9.
Explain entomophily.
Answer:
Entomophily refers to pollination by insects, which include bees, moths, butterflies wasp, and beetles. Among them, the dominant pollinators are the bees. They are the main flower visitors. The majority of angiosperm are pollinated by insects. Entomophily is the most common type of pollination.

Long answer questions

Question 1.
Describe the methods of layering.
Answer:
Layering is an artificial method of vegetative propagation, in which the stem of a parent plant is made to develop roots. When the stem develops roots, the rooted portion is cut and planted to grow as a new plant. Eg: Ixora and Jasminum. There are two types of layering.

1. Mound layering: when plants have flexible branches, the lower branch with leaves is bent to the ground and buried in the soil. So that the tip of the branch
   is exposed above the soil. The part of the stem which is buried in the soil develops roots and a cut is made in the parent plant so that the buried part grows into a new plant.
2. Air layering: In this method, the stem is girdled at the nodal region and root promoting hormones are applied to the girdled portion, which is covered with damp or moist soil using a polythene sheet. After 2-4 months, roots emerge in these branches. These rooted branches. are removed from the parent plant and grown in a separate pot or ground.

Question 2.
Explain tapetum and its types.
Answer:
Tapetum is the innermost layer of another wall and is derived from the peripheral wall layer and the connective tissue of another lining the anther locule. Thus, the tapetum is dual in origin and gives nourishment to the developing sporogenous tissue, microspore mother cells, and microspores. The cells of the tapetum may be uninucleate or may have more than one nucleus or polyploid nucleus. It also helps in the formation of wall material, sporopollenin, pollenkitt, tryphine and number of proteins that control incompatibility reaction. The fertility and sterility of the microspores or pollen grains are also controlled by tapetum.
Based on the behavior of tapetum, there are two types:

1. Secretary tapetum: In this case, original position, and cellular integrity are retained and supplies nourishment to the developing microspore.
2. Invasive tapetum: It is otherwise known as periplasmodial type of tapetum. In this type, the cells loose their inner tangential and radial walls and the protoplast of all tapetal cells coalesces to form periplasmodium.

Question 3.
Draw the different stages of the development of ovule and embryo sac of polygonum type.
Answer:

Question 4.
Enumerate the characteristic features of anemophilous plants.
Answer:

1. Pendulous, catkin-like flower or spike inflorescence are present.
2. The flowers are brought well above the leaves with an elongated axis of the inflorescence.
3. The perianth is absent or highly reduced.
4. The stamens are numerous with long filaments, exerted and versatile anther.
5. Enormous quantities of pollen grains are produced compared to the number of ovules available for pollination.
6. The pollen grains are minute, light, and dry in order to transport long-distance by the wind.
7. In some plants like Urtica, the anthers burst violently and release the pollen into the air.
8. Stigmas are comparatively large protruding, sometimes branched feathery, and adapted to catch the pollen grains.
9. Generally, a single ovule is present.
10. Flowers are produced before the new leaves appear so that the pollen can be carried by wind without any hindrance of leaves.

Question 5.
Explain the term Apomixis. Add a note on its types.
Answer:
Apomixis is the phenomenon in which reproduction does not involve the union of male and female gamete. Whereas the fertilization involving the union of male and female gametes in flowering plants is called amphimixis. Winkler in 1908 introduced the term apomixis. This is the substitution of usual sexual reproduction and this does not involve meiosis and syngamy.
Apomixis was classified into two types as Recurrent and Non-recurrent by Maheswari in 1950.
Recurrent apomixis: This induces vegetative reproduction and agamospermy. Vegetative reproduction is the propagation of plants by any part other than seeds.
Eg: Bulbs – Allium
Bulbils – Fritilaria imparialis
Runner – Mentha arvensis
Sucker – Chrysanthemum
Agamospermy refers to the processes by which embryos are formed by eliminating meiosis and syngamy.
Non-recurrent apomixis: Haploid embryo sac developed after meiosis, develops into an embryo without fertilization.

Choose the correct answers:

1. Match the following:

(a) (p)-(iv); (q)-(iii); (r)-(ii); (s)-(i)
(b) (p)-(iii); (q)-(iv); (r)-(i); (s)-(ii)
(c) (p)-(ii); (q)-(i); (r)-(iv); (s)-(iii)
(d) (p)-(iii); (q)-(i); (r)-(iv); (s)-(ii)
Answer:
(b) (p)-(iii); (q)-(iv); (r)-(i); (s)-(ii)

2. Match the following:

(a) (p)-(iv); (q)-(iii); (r)-(ii); (s)-(i)
(b) (p)-(iii); (q)-(iv); (r)-(i); (s)-(ii)
(c) (p)-(iii); (q)-(iv); (r)-(ii); (s)-(i)
(d) (p)-(ii); (q)-(i); (r)-(iv); (s)-(iii)
Answer:
(c) (p)-(iii); (q)-(iv); (r)-(ii); (s)-(i)

3. Match the following:

(a) (p)-(iv); (q)-(iii); (r)-(ii); (s)-(i)
(b) (p)-(iii); (q)-(i); (r)-(iv); (s)-(ii)
(c) (p)-(ii); (q)-(i); (r)-(iv); (s)-(iii)
(d) (p)-(iii); (q)-(iv); (r)-(ii); (s)-(i)
Answer:
(d) (p)-(iii); (q)-(iv); (r)-(ii); (s)-(i)

4. Match the following:


(a) (p)-(iii); (q)-(i); (r)-(iv); (s)-(ii)
(b) (p)-(iv); (q)-(ii); (r)-(iii); (s)-(i)
(c) (p)-(ii); (q)-(i); (r)-(iv); (s)-(iii)
(d) (p)-(ii); (q)-(iii); (r)-(iv); (s)-(i)
Answer:
(a) (p)-(iii); (q)-(i); (r)-(iv); (s)-(ii)

5. Match the following:

(a) (p)-(iv); (q)-(iii); (r)-(i); (s)-(ii)
(b) (p)-(iv); (q)-(iii); (r)-(ii); (s)-(i)
(c) (p)-(iv); (q)-(i); (r)-(ii); (s)-(iii)
(d) (p)-(ii); (q)-(i); (r)-(iv); (s)-(iii)
Answer:
(b) (p)-(iv); (q)-(iii); (r)-(ii); (s)-(i)

6. Who discovered the process of syngamy?
(a) E. Strasburger
(b) G.B. Amici
(c) Hofmeister
(d) E. Hanning
Answer:
(a) E. Strasburger

7. Vegetative propagation takes place through leaf buds in:
(a) Hibiscus
(b) Begonia
(c) Mango
(d) Malus
Answer:
(b) Begonia

8. The inner tangential wall of anther develops bands of:
(a) Polysaccharides
(b) Glycoprotein
(c) a cellulose
(d) p cellulose
Answer:
(c) a cellulose

9. Matured anther cavity is filled with:
(a) Megaspore
(b) Young microspore
(c) Embryo sac
(d) Pollen grain
Answer:
(d) Pollen grain

10. Epihydrophily type of pollination takes place in:
(a) Hydrilla
(b) Elodea
(c) Ipomea
(d) Pistia
Answer:
(b) Elodea

11. Choose the odd one out.
(a) Protogyny
(b) Cleistogamy
(c) Autogamy
(d) Homogamy
Answer:
(a) Protogyny

12. Find out the odd one:
(a) Cutting
(b) Grafting
(c) Micropropagation
(d) Air layering
Answer:
(c) Micropropagation

13. Choose the odd one.
(a) Endothecium
(b) Nucellus
(c) Tapetum
(d) Epidermis
Answer:
(b) Nucellus

14. Identify the odd one.
(a) Chalaza
(b) Endothelium
(c) Hilum
(d) Ubisch bodies
Answer:
(d) Ubisch bodies

15. Choose the odd one out.
(a) Orthotropous
(b) Microsporous
(c) Hemianatropous
(d) Campylotropous
Answer:
(b) Microsporous

16. Choose the incorrect pair.

Answer:
(d)

17. Choose the correct pair.

Answer:
(c)

18. Choose the incorrect pair.

Answer:
(d)

19. Identify the correct pair.

Answer:
(c)

20. Choose the incorrect pair.


Answer:
(d)

21. Assertion: The cells of endothecium are hygroscopic in nature.
Reason: They absorb water from air.
(a) Assertion is true and the Reason is false.
(b) Assertion is false and the Reason is true.
(c) Both Assertion and Reason are true.
(d) Both Assertion and Reason are false.
Answer:
(c) Both Assertion and Reason are true.

22. Assertion: P0llen grains are the immediate product of meiosis of the microspore mother cell.
Reason: the p0llen grains have a diploid number of chromosomes.
(a) Assertion is true and the Reason is false.
(b) Assertion is false and Reason is true.
(c) Both Assertion and Reason are true.
(d) Both Assertion and Reason are false.
Answer:
(d) Both Assertion and Reason are false.

23. Assertion: The filiform apparatus of synergids guides the pollen tube into the egg.
Reason: It helps in the absorption and conduction of nutrients.
(a) Assertion is true and the Reason is false.
(b) Assertion is false and the Reason is true.
(c) Both Assertion and Reason are true.
(d) Both Assertion and Reason are false.
Answer:
(a) Assertion is true and the Reason is false.

24. Assertion: self-p0llinati0n is possible only in those plants which bear bisexual flowers.
Reason: The availability of pollen and stigma are in the same flower for self-pollination.
(a) Assertion is true and the Reason is false.
(b) Assertion is false and the Reason is true.
(c) Both Assertion and Reason are true.
(d) Both Assertion and Reason are false.
Answer:
(c) Both Assertion and Reason are true.

25. Assertion: In some bisexual flowers, anthers and stigma mature at different times.
Reason:
This is a special adaptation in plants to prevent cross-fertilization.
(a) Assertion is true and the Reason is false.
(b) Assertion is false and the Reason is true.
(c) Both Assertion and Reason are true.
(d) Both Assertion and Reason are false.
Answer:
(d) Both Assertion and Reason are false.

26. Which of the following statement is correct?
(a) Budding is the method of asexual reproduction in spirogyra.
(b) Formation of conidia is the method of asexual reproduction in penicillium.
(c) asexual reproduction in planaria is the production of gametes.
(d) In hydra, the asexual reproduction is through the fragmentation method.
Answer:
(b) Formation of conidia is the method of asexual reproduction in penicillium.

27. Choose the incorrect statement.
(a) In mango, grafting is followed for vegetative propagation.
(b) In moringa, the stem cutting method is followed for vegetative propagation.
(c) In Hibiscus, leaf-cutting method is followed for vegetative propagation.
(d) In the Ixora plant, the layering method is followed by vegetative propagation.
Answer:
(c) In Hibiscus, leaf-cutting method is followed for vegetative propagation.

28. Find out the correct statement.
(a) Androecium and gynoecium are died essential organs for reproduction in plants.
(b) In protandrous flowers die gynoecium matures first.
(c) In protogynous flowers the androecium matures first.
(d) None of the above statements is correct.
Answer:
(a) Androecium and gynoecium are died essential organs for reproduction in plants.

29. Which of the following statement is false?
(a) The formation of haploid microspores from diploid microspore mother cell is through meiosis.
(b) The primary sporogenous cells may undergo a few meiotic divisions to form sporogenous tissue.
(c) The microspore mother cells are formed from the sporogenous tissue.
(d) All the above statements are correct.
Answer:
(b) The primary sporogenous cells may undergo a few meiotic divisions to form sporogenous tissue.

30. Choose the correct statement.
(a) Orthotropous type of ovule is present in Cactaceae.
(b) Anatropous type of ovules are found in dicots and monocots.
(c) Hemianatropous type of Ovule is present in Alismataceae.
(d) Amphitropous type of ovule is present in Cactaceae.
Answer:
(b) Anatropous type of ovules are found in dicots and monocots.

Students get through the TN Board 12th Economics Important Questions Chapter 12 Introduction to Statistical Methods and Econometrics which is useful for their exam preparation.

TN State Board 12th Economics Important Questions Chapter 12 Introduction to Statistical Methods and Econometrics

Very short answer questions

Question 1.
What is quantitative data?
Answer:
The data are quantified on definite units of measurements.

Question 2.
What do you mean by standard deviations?
Answer:
It is the positive square root of the mean of squared deviations from the mean.

Question 3.
What is dispersion?
Answer:
Dispersion is the extent to which values in a distribution differ from the average of the distribution.

Question 4.
Write the formulas of (i) Arithmetic mean of ungrouped data (Direct Method) and (ii) Assumed mean.
Answer:
(i) Arithmetic mean = \(\overline{\mathbf{X}}=\frac{\sum x}{N}\)
(ii) Assumed mean = \(\overline{\mathbf{X}}=\mathbf{A}+\frac{\Sigma d}{\mathbf{N}}\)

Question 5.
Calculate Arithmetic mean from the data showing marks of students in a class in an economics test (5 students) (40,50,55,78,58) marks.
Answer:

The average mark of a student on the economics test is 56.2

Question 6.
What are the types of correlation?
Answer:
Correlation is commonly classified into negative and positive correlation’

Question 7.
What is the measure of dispersion?
Answer:

1. Absolute measures of dispersion
2. Relative measures of dispersion

Question 8.
Name the methods of studying correlation.
Answer:

1. Scatter diagram method
2. Graphic method
3. Karl Pearson coefficient of correlation.
4. Method of least squares

Question 9.
What do you mean by partial correlation?
Answer:
When there are more than two variables and if only two variables are considered keeping the other things constant, then it is known as partial correlation.

Question 10.
What do you mean by scattering diagram?
Answer:
It is a graph observed by plotted points when each point will represent the value of X and Y.

Short answer questions

Question 1.
Write a note on Standard deviation.
Answer:
The measures of central tendency, serve to locate the center of the distribution, but they don’t reveal how the items are spread out on either side of the center. Standard deviation is one of the methods of Absolute measure of dispersion. It is denoted as a (sigma). There are two methods of calculation of Standard deviation.
(i) Deviations took from Actual mean
(ii) Deviations took from Assumed mean

Question 2.
How to calculate the standard deviation. Explain.
Answer:
Standard deviation =
Where \(\overline{\mathrm{X}}\) = Mean value of distribution
n = number of observations
Steps:
(i) Find out the actual mean‘of the given data ( \(\overline{\mathrm{X}}\) )
(ii) Find out deviation of each value from the mean (x = X – \(\overline{\mathrm{X}}\))
(Hi) Square the deviations and Take total of squared deviations ∑ x².
(iv) Divided the total ∑ x² by number of observation \(\left(\frac{\Sigma x^{2}}{n}\right)\)
(v) The square root of \(\left(\frac{\Sigma x^{2}}{n}\right)\) is standard deviation.

When the size of the sample is less than 30
then variance =
n = number of observation

Question 3.
Calculate the Standard deviation of the following value 5,10, 25,30,50.
Answer:

The formula is

Question 4.
Scatter Diagram – Explain with diagram.
Answer:
Let (X₁, Y₁), (X₂, Y₂) (X_n, Y_n) be the N pairs of observation of the variables X and Y. If we plot the values of X along the X-axis and the corresponding values of Y along the Y-axis, the diagram obtained is called a Scatter Diagram.
The type of Scatter diagram under a simple linear is given below.

1. If the plotted points show an upward trend, correlation is position.
2. If the plotted points show a downward trend, the correlation is Negative.
3. If the plotted points show no trend, the variable is said to be uncorrelated.

Question 5.
National Sample Survey Organisation – Explain. (NSSO)
Answer:
This is also known as National Sample Survey Office where is an organization under the ministry of statistics of the Government of India conducting SocioEconomic surveys. It was established in 1950.
There is four divisions.

1. Survey Design and Research Division (SDRD)
2. Field Operations Division (FOD)
3. Data Processing Division (DPD)
4. Co-ordination and Publication Division (CPD).

Long answer questions

Question 1.
Calculate Karl Pearson’s coefficient of correlation from the following data.

Answer:

Question 2.
Calculate the regression coefficient and obtain the lines of regression for the following data.

Answer:

Regression coefficient of X on Y

(i) Regression Equation X on Y
X – \(\overline{\mathrm{X}}\) = b_xy (Y – \(\overline{\mathrm{Y}}\))
X – 4 = 0.929 (Y-11)
X – 4 = 0.929Y – 10.219
So the regression equation X on Y is
X = 0.929Y – 6.219
X = 0.929 – 6.219

(ii) Regression co-efficient of Y on X

(iii) Regression equation of Y on X
Y – \(\overline{\mathrm{Y}}\) = b_yx (X – \(\overline{\mathrm{X}}\))
Y – 11 = 0.929 (X – 4)
Y = 0.929 X – 3.716 + 11 .
Y = 0.929 X + 7.284
The Regression Equation of Y on X is
Y = 0.929X +7.284

Activity

Question 1.
Check, Count, and make a data set of the number of pages of your subject books of Economics, Commerce, History, Tamil, and English.
Answer:
Students would be benefited from the Activity, They will gain knowledge and will help them in various ways.
They are:

1. Helps to know about facts or the number of pages needed and available.
2. Helps to know the Quantified data for a definite unit of measurement.
3. Helps to refer to Qualitative characteristics of a subject.
4. Helps to know about the subject and the needed hours of study.
5. Help the on to Evaluate, understand and work on their daily Assignments.

Multiple choice questions

1. The first book to have statistics as its title was “contributions to vital statistics” by …………. in 1845.
(a) Adam smith
(b) Ronald fisher
(c) Francis GP Nelson
(d) Robbinson
Answer:
(c) Francis GP Nelson

2. Evidence from history proved that during the reign of ………… vital statistics existed.
(a) Asoka
(b) Kumara Gupta
(c) Chandra Gupta Maurya
(d) Chera
Answer:
(c) Chandra Gupta Maurya

3. In the modern world, it can be termed as;
(a) World of planning
(b) World of maths
(c) World of animals
(d) World of pictures
Answer:
(a) World of planning

4. ………… is the information about facts or numbers collected.
(a) Statistics
(b) Economics
(c) Data
(d) Econometrics
Answer:
(c) Data

5. Statistics is a branch of:
(a) Commerce
(b) Economics
(c) Maths
(d) Accounts
Answer:
(c) Maths

6. The Latin word ‘status’ represents:
(a) Logic
(b) Science
(c) Economics
(d) Statistics
Answer:
(d) Statistics

7. Quantitative data deal with:
(a) History
(b) Numbers
(c) Raw data
(d) Non-numeric values
Answer:
(d) Non-numeric values

8. Grouped data can be classified into:
(a) 4
(b) 2
(c) 3
(d) 5
Answer:
(b) 2

9. Sources of data collected for the first time is known as:
(a) Secondary data
(b) Quantitative data
(c) Primary data
(d) Qualitative data
Answer:
(c) Primary data

10. The published data are called as:
(a) Secondary
(b) Primary
(c) Raw
(d) Quantitative
Answer:
(a) Secondary

11. If the standard deviation is high, then it indicates:
(a) The scores are consistent
(b) The scores are scattered more
(c) The scores are scattered less
(d) The scores are constant
Answer:
(b) The scores are scattered more

12. By taking the ………. standard deviation can be derived deviation.
(a) Quotient
(b) Sum
(c) Square root
(d) Area
Answer:
(c) Square root

13. There are ………. basic components in time series.
(a) 2
(b) 4
(c) 3
(d) 5
Answer:
(b) 4

14. ……….. are useful to study the trend of business and economic variable.
(a) Mean
(b) Median
(c) Standard deviation
(d) Index number
Answer:
(d) Index number

Students get through the TN Board 12th Economics Important Questions Chapter 11 Economics of Development and Planning which is useful for their exam preparation.

TN State Board 12th Economics Important Questions Chapter 11 Economics of Development and Planning

Very short answer questions

Question 1.
What are the characteristics of UDCs?
Answer:

1. The predominance of primary sector
2. Low per capita income

Question 2.
What do you mean by human capital?
Answer:
Human capital means education and training that make human beings more productive resources.

Question 3.
What do you mean by the capital accumulation?
Answer:
It is the process of adding to the existing stock of capital.

Question 4.
What are the approaches to economic development?
Answer:

1. The traditional approach
2. The new welfare-oriented approach

Question 5.
What are the main problems of planning in UDCs?
Answer:
The main problems are overpopulation and low capital formation.

Short answer questions

Question 1.
Explain the traditional approach to the concept of development.
Answer:
The traditional approach defines development in economic terms. The increase in GNP is accompanied by a decline in the share of agricultural output and employment. It emphasizes the importance of industrialization.

Question 2.
What is the meaning of underdevelopment?
Answer:
It is the state of an economy where levels of living of masses are extremely low due to very low levels of per capita income resulting from low levels of productivity and high growth rate of population.

Long answer questions

Question 1.
Draw the pillars of NITI Aayog.
Answer:

Multiple-choice questions

1. ………. was the first country to introduce five-year plan.
(a) UK
(b) the USA
(c) USSR
(d) France
Answer:
(c) USSR

2. Planning in India is called as:
(a) Centralised planning
(b) Democratic planning
(c) Partial planning
(d) Indicative planning
Answer:
(b) Democratic planning

3. The planned holiday was from:
(a) 1966-69
(b) 1966-71
(c) 1966-67
(d) 1963-61
Answer:
(a) 1966-69

4. Planning is done in a democratic country.
(a) Choice
(b) Authority
(c) Inducement
(d) Market
Answer:
(c) Inducement

5. Modernisation means:
(a) Changes in education
(b) Industrialisation
(c) Rural development
(d) Structural change
Answer:
(d) Structural change

6. National planning commission was set up in:
(a) 1940
(b) 1947
(c) 1950
(d) 1955
Answer:
(c) 1950

7. India adopts ……….. type of plan.
(a) Annual plan
(b) Structural
(c) Mid-term plan
(d) Inducement plan
Answer:
(c) Mid-term plan

8. ………… prepared people’s plan.
(a) J.Nehru
(b) Gandhi
(c) M.N.Roy
(d) Dr.B.R.Ambedkar
Answer:
(c) M.N.Roy

9. …………….. sector is given more importance in the socialist sector.
(a) Agricultural
(b) Primitive sector
(c) Industrial
(d) Service
Answer:
(c) Industrial

10. The types of planning are:
(a) Decentralised
(b) Centralised
(c) Totalitarian
(d) Underdeveloped
Answer:
(d) Underdeveloped

11. The better we try to plan, the more planners we need was quoted by:
(a) Gandhi
(b) Nehru
(c) Adam smith
(d) Lewis
Answer:
(d) Lewis

Students get through the TN Board 12th Economics Important Questions Chapter 9 Fiscal Economics which is useful for their exam preparation.

TN State Board 12th Economics Important Questions Chapter 9 Fiscal Economics

Very short answer questions
Question 1.
How is public revenue classified?
Answer:
Public revenue can be classified into two types.

1. Tax Revenue,
2. Non-Tax Revenue

Question 2.
Name the tax revenue sources.
Answer:
They are income tax, corporate tax, sales tax, surcharge tax, and cess.

Question 3.
What do you mean by escheats?
Answer:
It refers to the claim of the state to the property of persons who die without legal heirs or documentary bills.

Question 4.
What is tax evasion?
Answer:
The burden of direct tax is so heavy that taxpayers always try to evade taxes.
This leads to the generation of black money which is harmful to the economy.

Question 5.
Write the nature of sales tax, VAT, and GST.
Answer:

1. Sales tax was multipoint tax with cascading effect.
2. VAT was multipoint tax without cascading effect:
3. GST is one point tax without cascading effect.

Question 6.
What do you mean by internal public debt?
Answer:
Internal public debt is a loan taken by the Government from the citizens or from different institutions within the country. It only involves the transfer of wealth.

Question 7.
What is the budget?
Answer:
The origin of the word budget is from French which means ‘A small Leather bag’. A budget is an annual financial statement that shows the estimated income and expenditure of the Government for the forthcoming financial years.

Question 8.
How are Government accounts maintained?
Answer:
They are maintained as

1. Consolidate fund,
2. Contingency fund and
3. Public accounts

Question 9.
Name the accounting committee of the Government.
Answer:
Public accounts committee and the estimates committee.

Question 10.
Name the types of the budget deficit.
Answer:

1. Revenue Deficit
2. Budget Deficit
3. Fiscal Deficit and
4. Primary Deficit

Question 11.
Name the local bodies of India.
Answer:

1. Village Panchayat
2. District Boards or Zila Parished
3. Municipalities and
4. Municipal Cooperations

Question 12.
Name the source of the village panchayat.
Answer:

1. General property tax,
2. Tax on land,
3. Profession tax and
4. Tax on animals and vehicles.

Question 13.
What do you mean by the fiscal policy?
Answer:
Fiscal policy means the budgetary manipulations affecting the macroeconomic variables – output, employment, saving, investment, etc.

Short answer questions

Question 1.
How does the modern state control monopoly?
Answer:
The concentration of monopoly has to be controlled by Government. So the state intervenes through control of monopolies and restrictive trade practices to curb the concentration of economic power. The Government can play three kinds of roles. They are:

1. As per producer of goods and services
2. As suppliers of public goods and social goods
3. As the regulator of the system

Question 2.
Write a note on GST.
Answer:

1. GST is an indirect tax that has replaced many indirect taxes in India. The goods and services taxes was passed in the parliament on 29th March 2017 and it came into effect on 1st July 2017. The GST in India is a comprehensive multi-stage, destination-based tax that is levied on every value addition.
2. GST has replaced many indirect tax laws.
3. GST is one indirect tax for the entire country.
4. Under the GST region, the tax will be levied at the final point of sale. In the case of intrastate sales, Central GST and State GST will be charged. Inter-state sales will be chargeable to Integrated GST.

Question 3.
What are the advantages of GST?
Answer:

1. GST will remove the cascading effect on the sale of goods and services.
   It will directly impact the cost of goods. Since the tax on tax is eliminated in this regime, the cost of goods decreases.
2. GST is also mainly technologically driven. All activities like registration, return filing, application for a refund, and response to notice need to be done online on the GST portal. This will speed up the process.

Question 4.
What are the main sources of internal public debt?
Answer:

1. Individually purchase Government bonds and securities.
2. Banks, both private and public, buy bonds from the Government.
3. Non-financial institutions like UTI, LIC, GIC, etc also buy Government bonds.
4. A central bank can lend the Government in form of a money supply. The central bank can also issue money to meet the expenditure of the Government.

Question 5.
Balanced budget vs unbalanced budget – explain.
Answer:
Balanced budget: It is a situation in which the estimated revenue of the Government during the year is equal to its anticipated expenditure.
Government’s Estimated Revenue = Government’s Proposed Expenditure.
Unbalanced budget: The Budget in which revenue and expenditure are not equal to each other is known as an unbalanced Budget. It is of two types. They are surplus and deficit budgets.

Question 6.
What is the process in the preparation of the budget?
Answer:

Long answer questions

Question 1.
What are the classifications of public expenditure?
Answer:
I. Classification on the basis of benefit

1. Public expenditure benefiting the entire society. Eg: Defence
2. Public expenditure conferring a special benefit on certain people and at the same time common benefit on community Eg: Administration of justice.
3. Public expenditure directly benefiting a particular group of persons and indirectly the entire society. Eg: Public welfare.
4. Public expenditure conferring a special benefit to some individual. Eg: Subsidy.

II. Classification basis of function

1. Protection function: To protect from external invasion and internal disorder. Eg: defense.
2. Commercial function: Development of trade and commerce. Eg: transport and communication
3. Development function: Public expenditure incurred for the development infrastructure and industry.

Question 2.
Merits of direct taxes – explain.
Answer:

1. Equity: Indirect taxes, the rate of tax varies according to the tax base.
   Eg: income tax.
2. Certainty: It can be ensured by direct taxes Eg: income taxpayers know when and what rate he has to pay income tax?
3. Elasticity: Direct taxes also satisfy the canon of elasticity. Income tax is income elastic in nature. As income level increases, the tax revenue to the Government also increases automatically.
4. Economy: The cost collection of direct taxes is relatively low. The taxpayers pay the tax directly to the state.

Activity

Question 1.
Collect various bills and tabulate different rates of GST for different goods and services.
Answer:
Note: This activity is an eye-opener for the students.
It is the goods and services tax.

1. It helps the students to know the method of taxation.
2. It helps the students to know how and when it is levied.
3. Helps them to identify the rate of taxation on different goods.
4. Helps them to realize the importance of taxation.
5. Helps them to understand the value of services and the importance of tax payment.

Multiple-choice questions

1. Fiscal economics is also known as:
(a) Public finance
(b) Public expenditure
(c) Increase expenditure
(d) Federal finance
Answer:
(a) Public finance

2. Financial operations of the Government is done by:
(a) Bill of exchange
(b) Cheques
(c) Treasury
(d) RBI
Answer:
(c) Treasury

3. The term fiscal means in Greek:
(a) Flower
(b) Money
(c) Basket
(d) Tax
Answer:
(c) Basket

4. Main objectives of the public sector are to provide ………… in the economy.
(a) Demand
(b) Social benefit
(c) Supply
(d) Production
Answer:
(b) Social benefit

5. The Government has to administer fiscal policy and monetary policy to achieve ……….. goals.
(a) Micro Economic
(b) Fiscal Economic
(c) Managerial Economic
(d) Macro Economic
Answer:
(d) Macro Economic

6. ………. classified Public expenditure on the basis of functions of Government.
(a) Adam Smith
(b) Ricardo
(c) Marshall
(d) Mill
Answer:
(a) Adam Smith

7. There are more than ………. cities above one million population.
(a) 44
(b) 54
(c) 64
(d) 34
Answer:
(b) 54

8. According to Dalton the term ……….. has two senses that is wide and narrow.
(a) Public debt
(b) Public expenditure
(c) Public income
(d) Public finance
Answer:
(c) Public income

9. Public revenue can be classified into ……….. types.
(a) 2
(b) 3
(c) 5
(d) 6
Answer:
(a) 2

10. Central Board of Direct Taxes (CBDT) comes under:
(a) Defence ministry
(b) Ministry of foreign affairs
(c) Ministry of finance
(d) Ministry of health
Answer:
(c) Ministry of finance

11. ………… is paid by a shopkeeper or a retailer.
(a) Excise duty
(b) Sales Tax
(c) Custom duty
(d) Entertainment tax
Answer:
(b) Sales Tax

12. GST is ………. tax.
(a) Road tax
(b) Direct tax
(c) Custom tax
(d) Indirect tax
Answer:
(d) Indirect tax

13. The GST act was passed in the parliament in the year:
(a) 2016
(b) 2017
(c) 2001
(d) 2018
Answer:
(b) 2017

14. During ………. period private investment is lacking.
(a) Inflation
(b) War
(c) Depression
(d) Business cycle
Answer:
(c) Depression

15. The process of repaying a public debt is called:
(a) Budgetary surplus
(b) Redemption
(c) Capital levy
(d) Conversion
Answer:
(b) Redemption

16. Sinking fund was first introduced in:
(a) Lebanon
(b) the USA
(c) England
(d) India
Answer:
(c) England

17. Performance budget is also known as:
(a) Union budget
(b) Outcome budget
(c) State budget
(d) Deficit budget.
Answer:
(b) Outcome budget

18. The performance budget was first made in:
(a) London
(b) the USA
(c) USSR
(d) India
Answer:
(b) the USA

Pick the odd one out.

1. Right to print currency involves ………….. of currency.
(a) Creation
(b) Deposit
(c) Distribution
(d) Monitoring
Answer:
(b) Deposit

2. Public finance future investment include:
(a) Building of schools
(b) Banks
(c) Hospitals
(d) Infrastructure
Answer:
(b) Banks

3. It is the duty of the state to make provisions for:
(a) Inflation
(b) Education
(c) Health
(d) Sanitation
Answer:
(a) Inflation

4. Protection function is to protect the citizen:
(a) defense
(b) police
(c) watchman
(d) court
Answer:
(c) watchman

5. The Government has been providing subsidies on a number of items like:
(a) Fertilisers
(b) Exports
(c) Banks
(d) Education
Answer:
(c) Banks

6. The Government has been tender taking ……….. various development projects is:
(a) Irrigation
(b) Machinery
(c) Human resource
(d) Telecommunication
Answer:
(c) Human resource

7. Fine is imposed on an individual for violation of law example:
(a) Traffic rules
(b) Payment of income tax
(c) Payment after the stipulated time
(d) Illiteracy
Answer:
(d) Illiteracy

8. Non-financial institution is like:
(a) UTI
(b) LIC
(c) Moneylender
(d) GIC
Answer:
(c) Moneylender

9. The main source of external public debt are:
(a) IMF
(b) IDA
(c) HDFC
(d) ADB
Answer:
(c) HDFC

10. Revenue expenditure includes:
(a) Defence expenditure
(b) Subsidies
(c) Interest payment on debt
(d) Foreign currency
Answer:
(d) Foreign currency

Students get through the TN Board 12th Economics Important Questions Chapter 8 International Economic Organisations which is useful for their exam preparation.

TN State Board 12th Economics Important Questions Chapter 8 International Economic Organisations

Very short answer questions

Question 1.
Write a note in TRIMs.
Answer:
Trade-related investment measures are related to conditions or restrictions in respect of Foreign investment in the country. It introduces equal treatment for Foreign companies on par with National Companies.

Question 2.
What is MFA?
Answer:
The Multi Fibre Agreement Governed by the World Trade in textile and garments since 1974.

Question 3.
Why was the SDR created?
Answer:

1. To be the World Reserve Currency.
2. To create Global liquidity.

Question 4.
How is SDR Valued?
Answer:
The value of SDR was initially defined as equivalent to 0.888671 grams of fine gold – which at the time was also equivalent to one US Dollar.

Question 5.
What is World Bank’s lending procedure?
Answer:
The bank advances loans to members in three ways.

1. Loans out of its own fund
2. Loans out of borrowed capital and
3. Loans through Bank’s guarantee

Question 6.
What are the development activities of the World Bank in rural areas?
Answer:

1. Spread of education among rural people.
2. Development of roads in rural areas.
3. Electrification of the villages.

Question 7.
Write a note on WTC. (WORLD TRADE CENTRE).
Answer:
WTC Headquarters located in New York, USA. Landmark is Twin Towers. It brings together businesses involved in International Trade from around the Globe.

Question 8.
Write a note on TRIPs – Trade-Related Intellectual Property Rights.
Answer:
TRIPs was established in 1995. It changes the face of International Intellectual property (IP) Law and Policymaking. The TRIPs agreement helps ease trade tensions about IP issues.

Question 9.
Write a note on (CRA).
Answer:
Contingent Reserve Arrangement has further defended and consolidated the partnership of its members in the Economic – Financial area.

Question 10.
Write a short note on BRICS.
Answer:
BRICS is the acronym for an association of five major emerging National Economics. Like Brazil, Russia, India, China, and South Africa. It was coined in 2001. BRICS members are known for their significant influence on Regional Affairs.

Short answer questions

Question 1.
How are the IMF functions grouped?
Answer:

1. Financial: Assistance to correct the short and medium-term deficit in BOP
2. Regulatory: Code of conduct
3. Consultative: Counseling and technical consultancy.

Question 2.
What are the objectives of the world bank?
Answer:

1. Reconstruction and Development
2. Encouragement to Capital Investment
3. Encouragement to International Trade
4. Establishment of Peace – Time Economy
5. Environmental Protection.

Question 3.
What are the major functions of WTO?
Answer:

1. Administering WTO Trade Agreements.
2. Forum for Trade Negotiations.
3. Handling trade disputes.
4. Monitoring National Trade Policies.
5. Technical Assistance and Training for Developing Countries.
6. Co-operation with other International Organizations.

Question 4.
What are the facts about BRICS?
Answer:
BRICS countries make up 21% of Global GDP. They have increased the share of global GDP threefold in the past 15 years. BRICS are home to 43% of the World’s population. The countries have combined foreign reserves of an estimated $4.4 trillion.

Question 5.
How did India benefit from WTO?
Answer:
By reducing tariff rates on raw materials components and capital goods it was able to import more for meeting her developmental requirements. It also gets market access in several countries without any bilateral agreement.

Long answer questions

Question 1.
Explain the achievements of the IMF.
Answer:

1. Establishment of monetary reserve fund: It achieved sizeable stock of National Currencies of different countries. To meet the foreign exchange requirements of the member nations. IMF uses its stock to help the member nations to meet foreign exchange requirements.
2. Monetary discipline and co-operation: The IMF has shown keen interest in maintaining monetary discipline and cooperation among the member countries. To achieve this objective, it has provided assistance only to those countries which make sincere efforts to solve their problems.
3. Special interest in the problems of UDCs: The notable success is the maintenance of special interest in the acute problems of developing countries. The fund has provided Financial Assistance to solve the Balance of Payment problem of UDCs and the developed countries have achieved Substantial Growth.

Question 2.
Explain the achievements of the World Bank.
Answer:
It has achieved the primary objectives of reconstructions and the development of war-ravaged nations.

1. IBRD has 189 member countries now.
2. World Bank grants medium and long-term loans for re-construction and development purposes for its member countries.
3. Now World Bank loans mainly directed towards poor masses of the developing countries.
4. The World Bank grants loans to member countries only for productive purposes, particularly for agriculture, irrigation, power, and transport.
5. The International Development Association IDA – Provides loans to UDCs at a very low rate of interest.

Question 3.
Explain India and World Bank.
Answer:
The IBRD was first suggested by India to the drafting committee. From that time they have developed a close relationship with each other framing policies of economic development in India. The World Bank has given large financial assistance to India for Economic Development. Especially for the development of infrastructure like Electric power, Transport, etc.
The World Bank has assisted a number of projects in India. The IFC has identified five priority areas namely capital market development, direct Foreign investments in new and expanding companies, and infrastructure. The World Bank has also assisted India in poverty alleviation programs and Economic development.

Activity

Question 1.
The students are asked to go through the World map thoroughly to understand the location of Countries and their Capital.
Answer:
Practice and identification of map and location of places in the World Map.

1. Develops map marking skills of the student.
2. Helps to know the location of different countries of the world.
3. Helps to develop tourism among students.
4. Helps to create knowledge globally.
5. Helps to enhance their worldly knowledge.

Question 2.
The students may go to relevant websites to understand the international economic organizations and their events.
Answer:

1. Helps to have knowledge of computer applications.
2. Helps to know about world affairs.
3. Encourages to know the day-to-day happenings around the world.
4. Helps to understand clearly that economics is much a part of human life.

Multiple choice questions

1. The GATT was transformed into WTO on:
(a) 1995
(b) 1996
(c) 1997
(d) 1998
Answer:
(a) 1995

2. The IMF headquarters are in:
(a) Geneva
(b) Hong kong
(c) the USA
(d) Washington DC
Answer:
(d) Washington DC

3. The Bretton wood conference proposed, IMP World Bank and ITO in:
(a) 1934
(b) 1944
(c) 1954
(d) 1964
Answer:
(b) 1944

4. At present the IMF have ………… members.
(a) 189
(b) 179
(c) 159
(d) 149
Answer:
(a) 189

5. A member can borrow from IMF fund in a year equal to ………… % of its quota.
(a) 50
(b) 75
(c) 100
(d) 25
Answer:
(d) 25

6. The buffer stock financing facility was started in:
(a) 1949
(b) 1959
(c) 1969
(d) 1979
Answer:
(c) 1969

7. The IMF established SAF to provide:
(a) Loans
(b) Cheques in total
(c) Additional BOT
(d) Additional BOP
Answer:
(d) Additional BOP

8. IBRD is otherwise called as:
(a) IMF
(b) RBI
(c) World bank
(d) Central bank
Answer:
(c) World bank

9. The WTO was established in:
(a) 1995
(b) 1935
(c) 1925
(d) 1965
Answer:
(a) 1995

10. The first SAARC summit was held at:
(a) China
(b) Nepal
(c) Pakistan
(d) Dhaka
Answer:
(d) Dhaka

11. SAARC meets once in ……… years.
(a) 4
(b) 3
(c) 2
(d) 1
Answer:
(c) 2

12. In 2018 ………… SAARC summit was hosted.
(a) 5
(b) 20
(c) 15
(d) 10
Answer:
(b) 20

Pick the odd one out.

1. The Nation of BRICS is:
(a) Brazil
(b) Russia
(c) Israel
(d) China
Answer:
(c) Israel

2. World Bank group:
(a) IBRD
(b) IFC
(c) RBI
(d) IDA
Answer:
(c) RBI

3. WTO conference held in:
(a) Geneva
(b) Hong kong
(c) Doha
(d) Arabia
Answer:
(d) Arabia

4 are the member countries of ASEAN.
(a) Indonesia
(b) Singapore
(c) the Philippines
(d) Bangkok
Answer:
(d) Bangkok

5. The Financial Institutions are:
(a) IMF
(b) IBRD
(c) BOP
(d) IFC
Answer:
(c) BOP

6. The IFC has identified priority areas as:
(a) Capital market
(b) FDI
(c) Access to foreign market
(d) Profit and loss account
Answer:
(d) Profit and loss account

7. Intellectual property rights include:
(a) Copyright
(b) Trademarks
(c) Patents
(d) Advertisements
Answer:
(d) Advertisements

8. BENELVX is:
(a) Belgium
(b) Netherland
(c) Libia
(d) Luxembourg
Answer:
(c) Libia

9. SAARC was established in 1985 for:
(a) Social Development
(b) Economic Development
(c) Cultural Development
(d) Production Development
Answer:
(d) Production Development

10. ASEAN dialogue partners are:
(a) China
(b) Tamil Nadu
(c) Japan
(d) Australia
Answer:
(b) Tamil Nadu

Students get through the TN Board 12th Economics Important Questions Chapter 7 International Economics which is useful for their exam preparation.

TN State Board 12th Economics Important Questions Chapter 7 International Economics

Very short answer questions

Question 1.
What is the Foreign exchange rate?
Answer:
It is a rate at which the currency of one country can be exchanged for the currency of another country.

Question 2.
Write about the equilibrium in the Foreign exchange market.
Answer:
Equilibrium in a free fluctuating foreign exchange market is brought out by the interaction of forces of demand and supply of foreign exchange.

Question 3.
What is parity value?
Answer:
In a fixed exchange rate system, the value of the currency will be fixed in terms of other currencies or in terms of gold. This value is known as the parity value of the currency.

Question 4.
When is there a deficit in BOT?
Answer:
When the value of exports is less than the value of imports, then there will be a deficit in BOT.

Question 5.
What are the components of BOT?
Answer:
Export of goods and import of goods.

Question 6.
Name four items of the current account of BOT.
Answer:

1. Export and import of goods.
2. Export and import of services.
3. Unilateral transfers.
4. Investment income.

Question 7.
Name the two accounts of the BOP account.
Answer:
The current account and the capital account.

Question 8.
What is meant by disequilibrium in BOP?
Answer:
It means that there is either surplus or deficit in a BOP.

Question 9.
Write the causes for disequilibrium in a BOP.
Answer:

1. Large imports due to large-scale development expenditure.
2. High domestic prices
3. New sources of supply and new substitutes
4. Political instability
5. Changes in taste, fashion, and preference.

Question 10.
Write various forms of capital account transactions.
Answer:

1. Private transactions
2. Official transactions
3. Direct investment
4. Portfolio investment

Question 11.
Define comparative cost advantage.
Answer:
According to Ricardo, “a country can gain from trade when it produces at relatively lower costs. Even when a country enjoys an absolute advantage in both goods; the country would specialize in the production and export of goods of those goods which are relatively more advantageous.”

Question 12.
What is Foreign exchange?
Answer:
Forex is Foreign currencies. It is a mechanism through which payments are effected between two countries having different currency systems.

Question 13.
What do you mean by exchange control?
Answer:
It means that the state intervention in the Forex market. It is a popular method used to influence the BOP position in the country.

Question 14.
What is import control?
Answer:
Imports may be controlled by imposing import duties, restricting imports through import quotas. Licensing and even prohibition of import of certain unimportant products would encourage smuggling.

Question 15.
What is the meaning of trade?
Answer:
It is expressed as the relationship between export prices and import prices. Term of trade improves when the average price of exports is higher than the average price of imports.

Short answer questions

Question 1.
Name the major sectors that benefitted from FDI in India.
Answer:

1. Financial sector
2. Insurance
3. Telecommunication
4. Hospitality and tourism
5. Pharmaceuticals and
6. Software and information technology.

Question 2.
Which are the industrial sectors where FDI is not permitted?
Answer:

1. Arms and ammunition
2. Atomic energy
3. Railways
4. Coal and lignite and
5. Mining of iron, manganese, etc.

Question 3.
What are the measures to correct BOP disequilibrium?
Answer:

1. Depreciation
2. Devaluation
3. Import control
4. Export promotion
5. Exchange control
6. Production of import substitutes
7. Monetary policy
8. Capital import

Question 4.
What are the determinates of exchange rates?
Answer:
Differentials in inflation, the differential in interest rates, current account deficit, public debt, terms of trade, political and economic stability, recession, and speculation.

Question 5.
Define (a) NEER, (b) REER and (c) RER.
Answer:

1. NEER is the measure of the average relative strength of a given currency without eliminating the effect of price change.
2. REER is an effective exchange rate based on real exchange rates instead of nominal rates.
3. RER is the exchange rate that is based on constant prices to eliminate the effect of price changes.

Question 6.
Distinguish between BOP and BOT.
Answer:
BOP: It is the difference between nations’ total payment to foreign countries and its receipts from them during a period of time.
BOT: It is the difference between the money value of imports and exports of material goods only. Whereas BOP is the difference between a country’s receipts and payments in Foreign exchange.

Long answer questions

Question 1.
Explain the gains from international trade.
Answer:
The gains from international trade may be categorized under four heads.
(a) Efficient productions: International specialization gives the gains of

1. Better utilization of resources.
2. The concentration of production of advantageous goods.
3. Saving in time.
4. Perfection of skills in production.
5. Improvements in the techniques of production.
6. Increased production.
7. A higher standard of living in the trading countries.

(b) Equalization of prices between countries: International trade may help to equalize prices in all the trading countries.

1. Prices of goods are equalized between the countries.
2. The difference in cost of transportation.
3. Prices of factors of production are also equalized.

(c) Equitable distribution of scarce materials: It may help the trading countries to have equitable distribution of scarce resources.
(d) General advantages of international trade:

1. Availability of a variety of goods for consumption.
2. Generation of more employment opportunities.
3. Industrialization of backward nations.
4. Improvement in the relationship among countries.
5. Divisions of labour and specialization.
6. Expansions in transport facilities.

Question 2.
Balance of payment – disequilibrium correction explain, (or) Explain the flow chart of the balance of payment disequilibrium.
Answer:

Question 3.
What are the advantages of FDI?
Answer:

1. It increases the investment level and in course and employment in the country.
2. It facilitates the transfer of technology to the recipient country.
3. It brings revenue to the country by tax profits and royalties from concession agreements.
4. Expansions, modernization, or development of industries are part of the profit from FDI.
5. Through professional management, a managerial revolution is created.
6. The export is increased and import is reduced through foreign capital.
7. The social returns are greater than the private returns on foreign investment if FDI adds more value to output.
8. It helps to increase competition and break domestic monopolies.
9. By bringing capital and foreign exchange, FDI may help in filling the earnings gap in order to achieve the goal of national economic development.
10. It stimulates domestic enterprises to invest in ancillary industries.
11. It also encourages its entrepreneurs to invest.

Question 4.
What are the disadvantages of FDI – Explain.
Answer:
The disadvantages are:

1. Private foreign capital tends no flow to the high-profit areas rather than to the priority sectors.
2. The technologies brought in by the foreign investor may not be appropriate to the consumption needs.
3. Foreign investment has a sometimes unfavorable effect on the balance of payment.
4. It sometimes interferes in national politics.
5. Foreign investors sometimes engage in unethical trade practices.
6. Foreign investment in some cases leads to the destructions or weakening of small and medium enterprises.
7. Sometimes foreign investment can result in the dangerous situations of minimizing competitions and creation of monopolies.
8. Often there are several costs associated with encouraging foreign investment.

Activity

Question 1.
Students may be brought to any firm or industry which is involved in foreign trade to make them know the different procedures followed and activities done.
Answer:

1. This activity helps to analyze how people are involved in foreign trade.
2. Helps to develop a deep understanding of the industry and foreign trade procedures.
3. Helps to understand the difference between internal and international trade.
4. Helps to know the procedures involved in foreign trade.
5. Helps to know about the economy and how foreign trade is practiced in India.

Question 2.
Students may be grouped as countries and directed to have a look at some available goods to be exchanged between them as if they involve in foreign trade.
Answer:

1. Helps in interpersonal relationships.
2. Helps to take decisions in life.
3. Helps to develop a deep understanding of one’s own country and to do a comparison.
4. Helps to understand the difference between the barter system and money usage.
5. Helps in self-assessment and self-learning.

Multiple choice questions

1. …………. is one of the powerful force of economic integration.
(a) BOP
(b) BOT
(c) Trade
(d) FDI
Answer:
(c) Trade

2. International trade refers to exchange of goods and services between countries.
(a) Two or more
(b) Four
(c) Five
(d) Three
Answer:
(a) Two or more

3. …………… in 1776 developed the theory of absolute cost advantage.
(a) Alfred Marshall
(b) Adam Smith
(c) David Ricardo
(d) J.S. Mill
Answer:
(b) Adam Smith

4. The modern theory of international trade was developed by economist Eli Heckscher.
(a) German
(b) French
(c) Sweedish
(d) American
Answer:
(c) Sweedish

5. If for a given quantity of export, more quantity of import can be consumed by a country, then one can say that terms of trade are:
(a) Correct
(b) Favourable
(c) Not correct
(d) Unfavourable
Answer:
(b) Favourable

6. The income terms of trade was given by in 1948.
(a) Adam Smith
(b) J.S.Mill
(c) G.S.Dorrance
(d) Ricardo
Answer:
(c) G.S.Dorrance

7. ………….. has devised another concept called the single factoral terms of trade.
(a) Viner
(b) G.S. Dorrance
(c) Ricardo
(d) Marshall
Answer:
(a) Viner

8. Gross barter terms of trade was an improvement over:
(a) Balance of trade
(b) Balance of payment
(c) Net terms of trade
(d) Factoral terms of trade
Answer:
(c) Net terms of trade

9. BOP and BOT are two different concepts in the subject of:
(a) Internal Trade
(b) External Trade
(c) International Trade
(d) Home Trade
Answer:
(c) International Trade

10. Export and imports of commodities are also known as:
(a) Invisible trade
(b) Direct trade
(c) Visible trade
(d) Indirect trade
Answer:
(c) Visible trade

11. BOP is to be favourable that is:
(a) R/P > 1
(b) R/P < 1 (c) R/Q > 1
(d) R/Q < 1 Answer: (a) R/P > 1

12. World trade shrinks during:
(a) Equilibrium
(c) Inflation
(b) Disequilibrium
(d) Depression
Answer:
(d) Depression

13. Structural disequilibrium is called in ………… economics.
(a) Traditional
(b) Developing
(c) Underdeveloped
(d) Capitalistic
Answer:
(b) Developing

14. Deficit in the balance of payment of developing countries is caused by:
(a) Veblen effect
(b) Demonstration effect
(c) Giffen effect
(d) Income effect
Answer:
(b) Demonstration effect

15. When the market forces of demand and supply are allowed to play freely ……….. will be restored.
(a) Demand
(b) Supply
(c) Market
(d) Equilibrium
Answer:
(d) Equilibrium

16. ……… is responsible for high imports and how exports.
(a) High domestic price level
(b) High domestic income level
(c) High domestic supply level
(d) High domestic exchange level
Answer:
(a) High domestic price level

17. …………. means a deliberate reduction of the official rate
(a) Inflation
(b) Deflation
(c) Devaluation
(d) Price discrimination
Answer:
(c) Devaluation

18. Exchange control means the state intervention in the:
(a) FOREX market
(b) Capital market
(c) Monopoly market
(d) Perfect market
Answer:
(a) FOREX market

19. ……….. is a method employed to influence the BOP in a country.
(a) Credit control
(b) Exchange control
(c) Money control
(d) Devaluation
Answer:
(b) Exchange control

20. …………… refers to foreign currencies.
(a) FOREX
(b) USD
(c) GNP
(d) NDP
Answer:
(a) FOREX

21. Inflation and exchange rates are ………. related.
(a) Positively
(b) Negatively
(c) Directly
(d) Inversely
Answer:
(d) Inversely

22. RBI can influence both inflation and exchange rates by manipulating:
(a) Rate of income
(b) Rate of supply
(c) Interest rate
(d) Rate of demand
Answer:
(c) Interest rate

23. Excess demands for foreign currency ………. a country’s exchange rate.
(a) Lowers
(b) Increases
(c) Equalises
(d) Spoils
Answer:
(a) Lowers

24. ……….. is part of the capital account of the BOP.
(a) FII
(b) FDI
(c) CRR
(d) FPI
Answer:
(d) FPI

25. Foreign investment takes the form of:
(a) Indirect investment
(b) Direct investment
(c) Induced investment
(d) Capital investment
Answer:
(b) Direct investment

26. Balance of payments of a country is a statement that records:
(a) Sources of foreign exchange
(b) Uses of foreign exchange
(c) Both (a) and (b)
(d) None of the above
Answer:
(c) Both (a) and (b)

27. The categories of transactions that are included in the current account of BOP are:
(a) Exports and imports of goods
(b) (a) + exports and imports of services
(c) (b) + income from and to abroad
(d) (c) + Transfers from and to abroad
Answer:
(d) (c) + Transfers from and to abroad

28. Balance of trade equal:
(a) Exports less imports
(b) Exports of goods less import of goods
(c) Exports of services less import of services
(d) None of the above
Answer:
(b) Exports of goods less import of goods

29. The categories of transactions that are included in the capital account of BOP are:
(a) Investments from and to abroad
(b) Borrowings and lendings from and to abroad
(c) Changes in foreign exchange reserves
(d) All the above
Answer:
(d) All the above

30. The measurement of the balance of payments deficit is based on:
(a) Autonomous transactions
(b) Accounting transactions
(c) Current account transactions
(d) Capital account transactions
Answer:
(a) Autonomous transactions

Pick the odd one out.

1. International economics consists of not only trade in goods and services but also:
(a) Capital flows
(b) Demand
(c) BOP
(d) Rate of exchange
Answer:
(b) Demand

2. The financial institutions like:
(a) IMF
(b) IBRD
(c) ICICI
(d) Moneylender
Answer:
(d) Moneylender

3. Internal trade is also known as:
(a) Domestic trade
(b) Home trade
(c) Foreign trade
(d) Intra – regional trade
Answer:
(c) Foreign trade

4. Comparative cost theory was refined by:
(a) J.S.Mill
(b) Marshall
(c) Taussing
(d) Adam Smith
Answer:
(d) Adam Smith

5. The principle items shown on the credit side are:
(a) Transfer receipts in the forms of gifts
(b) FDI
(c) Borrowing from abroad
(d) Balance of trade
Answer:
(d) Balance of trade

6. The principle items on the debit side include imports of goods and services and:
(a) Transfer payment to foreigners
(b) Lending to foreign countries
(c) Gold from foreign countries
(d) Deficit payment
Answer:
(d) Deficit payment

7. The official reserve assets of a country include its:
(a) Gold stock
(b) SDR
(c) convertible foreign currencies
(d) Balance of trade
Answer:
(d) Balance of trade

8. Types of BOP disequilibrium are:
(a) Cyclical disequilibrium
(b) Secular disequilibrium
(c) Structural disequilibrium
(d) Development disequilibrium
Answer:
(d) Development disequilibrium

9. The less developed countries in the early stage of development depend on developed countries for:
(a) Import of commodities
(b) Demand of commodities
(c) Capital and technology
(d) Export potential is low
Answer:
(b) Demand of commodities

10. Under free exchange the automatic adjustments of BOP can take place through changes in the variables like :
(a) Price
(b) Interest
(c) Income
(d) Supply
Answer:
(d) Supply

11. The deliberate measures may be broadly grouped into:
(a) Monetary measures
(b) Trade measures
(c) Export measures
(d) Miscellaneous measures
Answer:
(c) Export measures

12. FDI is helpful to accelerate economic growth by development programmes like:
(a) Capital goods
(b) Raw materials
(c) Rural development
(d) Others inputs
Answer:
(c) Rural development

13. Fll is an investment in:
(a) Insurance companies
(b) Pension funds
(c) Bill of exchange
(d) Pension funds
Answer:
(c) Bill of exchange

14. FDI has been advantages in terms of:
(a) Improved technology
(b) Education
(c) Access to markets
(d) Free flow of capital
Answer:
(b) Education

15. FDI Firms in India have started investing in countries like:
(a) Nepal
(b) Tamilnadu
(c) Uganda
(d) Ethopia.
Answer:
(b) Tamilnadu

Students get through the TN Board 12th Economics Important Questions Chapter 6 Banking which is useful for their exam preparation.

TN State Board 12th Economics Important Questions Chapter 6 Banking

Very short answer questions

Question 1.
Name the Central banks established between 1921 and 1954.
Answer:

1. The South African Reserve Bank (1921)
2. The Central Bank of China (1928)
3. The Reserve Bank of India (1935)
4. The Central Bank of Ceylon (1950)
5. The Bank of Isreal (1954)

Question 2.
Write a note on primary deposits.
Answer:
Bank makes loans and advances to its customers out of these primary deposits. The initiative is taken by the customers. These deposits are also called “Passive deposits”

Question 3.
What do you mean by variable portfolio ceiling?
Answer:
The system by which the Central bank fixes the ceiling or maximum amount of loans and advances for every commercial bank.

Question 4.
What is a cheque?
Answer:
A cheque is an instrument that instructs the bank to transfer funds from the cheque issuer’s account to the receiver of the cheque.

Question 5.
Which monetary system does India follow?
Answer:
India follows the paper currency standard because in India, the standard currency is made of paper.

Question 6.
Why are financial institutions like UTI, LIC is not considered banks?
Answer:
Because such financial institutions do not accept chequable deposits.

Question 7.
Why are Post office savings banks are not treated as banks?
Answer:
Because they do not perform the bank’s essential functions of leading.

Question 8.
How NBFI are classified?
Answer:
Non-banking financial institutions are broadly classified into two. They are

1. Stock exchange and
2. Other financial institutions

Question 9.
What are the objectives of ARDC?
Answer:

1. To provide necessary funds by way of refinancing to eligible institutions like Scheduled bank etc..
2. To subscribe to the debentures floated by the Central land development banks etc.

Question 10.
What are the main objectives of RRBs?
Answer:
To provide credit and other facilities particularly to small and marginal farmers, agricultural laborers. So as to develop agriculture, trade industry and other production activities in Rural areas.

Question 11.
Write a note on a debit card.
Answer:
A debit card is a card allowing the holder to transfer money electronically from their bank account when making a purchase.

Short answer questions

Question 1.
What are the concessions of RRBs?
Answer:
Regional Rural Banks are granted concessions by the Central Banks

1. They are allowed to maintain Cash Reserve Ratio at 3% and the Statutory Liquidity Ratio at 25%.
2. RRBs also provide refinance facilities through NABARD.

Question 2.
What is the role of NABARD in agricultural credit?
Answer:

1. The RBI has shown keen interest in agricultural credit and has maintained a separate department.
2. RBI has extended short-term, medium and long-term credit to agriculture through state-level cooperative banks.
3. RBI also set up Agricultural Refinance Development Corporation (ARDC) to promote agricultural development.

Question 3.
What are the two faces of monetary policy?
Answer:
Inflation: (cheap money policy)

1. Borrowing is easy
2. Consumer buy more
3. Business expands
4. More people are employed
5. People spend more

Recession: (dear money policy)

1. Borrowing is difficult
2. Consumer buy less
3. Business postpone expansion
4. Unemployment increases
5. Production is reduced

Question 4.
Distinguish between Demand deposits and time deposits.
Answer:

Question 5.
Write a note on e-banking.
Answer:
Online banking also known as internet banking is an electronic payment system that enables customers of a bank. The online banking system typically connects the core banking system operated by a bank and is in contrast to branch banking which was the traditional way customers accessed banking services.

Question 6.
Differentiate between NEFT and RTGS.
Answer:
There are two systems of inter-bank transfer. These systems are maintained by RBI.

Question 7.
Write a note on Paytm.
Answer:
Payment Bank in August 2015, Paytm received a license from RBI to launch a payments bank. It is a separate entity in which founder Vijay Shekar Sharma will hold 51% share once communications hold 39% and 10% will be held by a subsidiary of one 97 and Sharma.

Question 8.
Write a note on the credit card.
Answer:
A credit card is a payment card issued to users to enable the cardholder to pay a merchant for goods and services based on the cardholder’s promise to the card issuer to pay them for the amounts, So paid-plus the other agreed charges. Credit cards combine with payment services with extensions of the credit card industry may limit customers’ ability to shopping.

Question 9.
Write a note on NPA.
Answer:
Non-Performing Asset. Once the borrower fails to make interest or principal payment for 90 days, the loan is considered to be a Non-Performing Asset. They depend on interest payment for income. The size of NPA is around 10 lakhs cr. So the government is forced to infuse capital to the banks by using poor Taxpayers’ money. The government of India has infused Rs. 68000 cr to the banking system. So the NPAs ultimately affect the common people.

Question 10.
Write a note on the merger of banks.
Answer:
Union cabinet decides to merge all the remaining five associate banks of the State Bank group with SBI in 2017. Five associates and the Bharatiya Mahila Bank have become part of SBI on April 1, 2017. This has placed SBI among the top 50 banks in the world. The five associate banks that were merged are

1. State Bank of Bikaner and Jaipur (SBBJ)
2. State Bank of Hyderabad (SBH)
3. State Bank of Mysore (SBM)
4. State Bank of Patiala (SBP) and
5. State Bank of Travancore (SBT).

Long answer questions

Question 1.
Explain industrial credit and investment Cooperation of India.
Answer:
Functions:

1. Assistance to industries
2. Provision of foreign currency loans
3. Merchant banking
4. Letter of credit
5. Project promotions
6. Housing loans
7. Leasing operation

This was set up on 5th Jan 1955. The purpose is to channelize the World bank funds to the industry in India and also help to build up a Capital market. Now a very large part of its equity capital is held by Public sector Institutions such as HC, GIC. The feature of the operation of ICICI is the foreign currency loans sanctioned by this institution of industries. Since 1973, the ICICI has entered the international capital markets also for raising foreign currency loans. ICICI also borrows from IDBI and the Government sector. The major portion of its assistance has gone to the private sector.

Question 2.
Explain IDBI – Industrial Development Bank of India.
Answer:
The IDBI was a wholly-owned subsidiary of RBI till 1976 and it was delinked and made an autonomous corporation, fully owned by the Government of India. The functions are

1. Assistance to other Financial institutions.
2. Direct assistance to industrial concerns. It can provide refinance in respect of term loans to IFC, SFC. The special feature of IDBI is the provision for the creation of a special fund known as the Development assistance fund. It provides assistance to industries. The financing of Exports was also undertaken by IDBI till the establishment of Exim bank in 1982.

Question 3.
Explain the State Level Institutions.
Answer:
The Government of India passed SFC Act in 1951. It is for the development of small and medium Industries. The SFC provides loans and assistance to industrial units. The maximum amount that can be sanctioned to the industry is up to 60 lakhs. SFC depends upon the IDBI for refinancing. It can also make temporary borrowings from RBI.

Question 4.
State Industrial Development Corporation (SIDCO).
Answer:
It was set up by the state governments. They provide financial assistance to industrial concerns by way of loans, promotional activities such as surveys, project identification, and training of entrepreneurs. SIDCO takes 26%, 25% of the equity, and the rest is offered to invest public. SIDCO also administers various government incentive schemes. They also borrow through bonds and accept deposits.

Activity

Question 1.
Students are to be asked to visit the nearby commercial bank to observe the functioning of the bank. They are also instructed to submit a brief report about their learning experiences.
Answer:
Visit a Commercial Bank: To know the functions of the Bank.

1. Helps to know and have a deep understanding of the functioning of Banks.
2. Students can perform Banking activities of their own.
3. Students will know and observe the day-to-day activities of a Bank.
4. Helps to develop a deep understanding of the Banking system.
5. Finally, students understand that Banking is much a part of human life.
6. They also understand the essence and importance of Banking.

Question 2.
Students are asked to do a brief survey about the impact of the 2016 Demonetisation of currency on the general public.
Answer:
Students as the first step can take interviews with their family members. Inference of Survey:

1. How public or the family members faced difficulties in changing 500 and 1000 Notes.
2. What are the difficulties they faced in ATM to withdraw the money for day to expenses?
3. The difficulties they faced in standing and waiting in front of ATMs and Banks.
4. The difficulties they faced especially when there was a family get-together or function.
5. The problems faced by the public during their travel.

Students will gather information from nearby areas, petty shops, and street vendors.

Multiple choice questions

1. When was the oldest Central bank in the world established?
(a) 1686
(b) 1656
(c) 1676
(d) 1666
Answer:
(b) 1656

2. Where was the international finance conference held in 1920?
(a) Russia
(b) USA
(c) South Africa
(d) Brussels
Answer:
(d) Brussels

3. The functions of commercial banks are broadly classified into:
(a) Three
(b) Four
(c) Two
(d) Five
Answer:
(a) Three

4. There are ……… types of deposits.
(a) 2
(b) 3
(c) 4
(d) 5
Answer:
(a) 2

5. Commercial banks help in providing foreign exchange to businessmen dealing with:
(a) Trade
(b) Money
(c) Industries
(d) Import and export
Answer:
(d) Import and export

6. Pooled savings should be allocated to various sectors of the economy with a view to increase:
(a) Consumption
(b) Production
(c) Distribution
(d) Exchange
Answer:
(b) Production

7. When was there an economic crises in US?
(a) In 2006 – 2007
(b) In 2004 – 2005
(c) In 2007 – 2008
(d) In 2001 – 2002
Answer:
(c) In 2007 – 2008

8. RBI has given ……….. crores to the Government of India in the year 2018 – 2019
(a) Rs. 60,000
(b) Rs. 78,000
(c) Rs. 63,000
(d) Rs. 68,000
Answer:
(d) Rs. 68,000

9. Banks provide ……….. credit for worthwhile projects.
(a) 90%
(b) 100%
(c) 80%
(d) 75%
Answer:
(b) 100%

10. RBI was Nationalized on:
(a) 1947
(b) 1949
(c) 1948
(d) 1946
Answer:
(b) 1949

11. …………. is the sole authority to issue currency.
(a) RBI
(b) SBI
(c) ICICI
(d) All the banks
Answer:
(a) RBI

12. According to sec 22 of ……….. every bank should obtain Banking License from RBI.
(a) Monetary policy
(b) Fiscal policy act
(c) Bank of India act
(d) Banking Regulation act
Answer:
(d) Banking Regulation act

13. RBI represents India as a member of:
(a) SBI
(b) FEMA
(c) FOREX
(d) IMF
Answer:
(d) IMF

14. Banking Regulation Act of in the basis for credit control of RBI.
(a) 1949
(b) 1959
(c) 1939
(d) 1929
Answer:
(a) 1949

15. The RBI was providing medium-term loans also for a period exceeding ……….. for reclamation of land.
(a) 15 months to 5 years
(b) 15 months to 3 years
(c) 15 months to 2 years
(d) 15 months to 5 years
Answer:
(d) 15 months to 5 years

16. RBI relating to agriculture credit has been over by ……….. since 1982.
(a) NABARD
(b) ARDC
(c) IMF
(d) ICICI
Answer:
(a) NABARD

17. ARDC was established on 1st July 1963.
(a) Act of RBI
(b) Act of Government
(c) Act of Parliament
(d) Act of Scheduled bank
Answer:
(c) Act of Parliament

18. NABARD gives long-term loans up to years to the state government.
(a) 20
(b) 30
(c) 10
(d) 40
Answer:
(a) 20

19. The planning commission now:
(a) NABARD
(b) RRB
(c) NITI Aayog
(d) SCB
Answer:
(c) NITI Aayog

20. IFCI was established .in:
(a) 1938
(b) 1948
(c) 1958
(d) 1968
Answer:
(b) 1948

21. Financial assistance of IFCI can be availed by any:
(a) Bank
(b) Public sector
(c) Limited company
(d) Industry
Answer:
(c) Limited company

22. ICICI was set up in 1955 as:
(a) Limited company
(b) Bank
(c) Public sector
(d) Joint-stock company
Answer:
(d) Joint-stock company

23. IDBI was delinked from RBI and became autonomous from the year:
(a) 1966
(b) 1976
(c) 1986
(d) 1956
Answer:
(b) 1976

24. The maximum amount that can be sanctioned to industry by SFC is:
(a) 20 lakhs
(b) 30 lakhs
(c) 60 lakhs
(d) 50 lakhs
Answer:
(c) 60 lakhs

25. ………… received Nobel prize in 1976 and introduced the doctrine of monetarism.
(a) Adam smith
(b) Alfred Marshall
(c) Lionel robbins
(d) Milton Friedman
Answer:
(d) Milton Friedman

26. ATM was introduced in:
(a) 1947
(b) 1957
(c) 1967
(d) 1977
Answer:
(c) 1967

27. ……… was the founder of Paytm Payments Bank.
(a) Milton Friedman
(b) Vijay Mallya
(c) Vijay Shekar Sharma
(d) Rakesh Sharma
Answer:
(c) Vijay Shekar Sharma

28. Demonetisation occurs whenever there is a change in:
(a) Government
(b) Political party
(c) Exchange rate
(d) National currency
Answer:
(d) National currency

29. Which of the following makes a financial institution a bank?
(a) Accepting deposits
(b) Lending
(c) Accepting demand deposits
(d) Accepting time deposits
Answer:
(c) Accepting demand deposits

30. Creation of money by commercial banks refer to:
(a) Creation of bank deposits
(b) Issuing currency
(c) Both (a) and (b)
(d) None
Answer:
(a) Creation of bank deposits

31. How much money are banks able to create is determined by?
(a) Initial deposits
(b) SCR
(c) CRR
(d) All the above
Answer:
(d) All the above

32. Given CRR=4% and SLR=16% the value of multipliers is:
(a) 25
(b) 6.25
(c) 5
(d) 8.33.
Answer:
(c) 5

33. When the Central bank sells securities in the market, the credit creation capacity of the commercial banks is like to:
(a) Rise
(b) Fall
(c) Rise or fall
(d) No effect
Answer:
(b) Fall

34. Raising Reverse Repo Rate by the central bank is likely to have the following impact on demand for goods and services in the economy:
(a) Rise
(b) Fall
(c) May rise and fall
(d) No effect
Answer:
(a) Rise

35. With lowering requirements by the central bank, the borrowing capacity of the borrowers:
(a) Rises
(b) Falls
(c) May rise and fall
(d) No effect
Answer:
(a) Rises

36. Which of the following is a bank?
(a) Post office savings bank
(b) LIC
(c) UTI
(d) IDBI
Answer:
(a) Post office savings bank

37. Finance is the essential breath of all economic activities:
(a) Trade
(b) Commerce
(c) Agriculture
(d) Collecting cheques
Answer:
(d) Collecting cheques

Pick the odd one out.

1. Commercial banks collect:
(a) Dividends
(b) Pensions
(c) Salaries
(d) Tax
Answer:
(d) Tax

2. Commercial banks make the payments of various obligations of customers such as:
(a) Telephone bills
(b) Rent
(c) Household equipment
(d) School fees
Answer:
(c) Household equipment

3. Commercial banks provide locker facilities to their customers for the safe custody of:
(a) Customers
(b) Jewellery
(c) Shares
(d) Debentures
Answer:
(a) Customers

4. Banks collect and publish statistics relating to:
(a) Population
(b) Trade
(c) Commerce
(d) Industry
Answer:
(a) Population

5. NBFs other financial institutions category comes:
(a) RBI
(b) Chit funds
(c) Unit trust
(d) Insurance companies
Answer:
(a) RBI

6. Monetary authority controls the supply of money in the economy to stabilize:
(a) Population
(b) Control inflation
(c) Banking system
(d) Exchange rate
Answer:
(a) Population

7. Statutory Liquidity Ratio is the amount which a bank has to maintain in the form of:
(a) Legal tender
(b) Cash
(c) Gold
(d) Approved securities
Answer:
(a) Legal tender

8. Moral suasion under this method Central bank gives ……….. to Commercial banks to co-operate.
(a) Advice
(b) Requests
(c) Persuades
(d) Notice
Answer:
(d) Notice

9. Economists are the chief exponents of Neutral money.
(a) Adam smith
(b) Wicksteed
(c) Hayek
(d) Robertson
Answer:
(c) Hayek

10. The objectives of demonetization:
(a) Removing black money from the currency
(b) Issuing the currency notes
(c) Stopping corruption
(d) Stopping terror funds
Answer:
(d) Stopping terror funds

11. Credit creation leads to increase:
(a) Production
(b) Public finance
(c) Employment
(d) Sales
Answer:
(b) Public finance

Students get through the TN Board 12th Economics Important Questions Chapter 5 Monetary Economics which is useful for their exam preparation.

TN State Board 12th Economics Important Questions Chapter 5 Monetary Economics

Very short answer questions

Question 1.
Write a note on the silver standard.
Answer:
This monetary system fixes the economic unit of account with the weight of silver. The silver standard is a monetary arrangement in which the Government allows the conversion of the currency into a fixed amount of silver.

Question 2.
Write a note on paper currency standard.
Answer:
In this system, paper currency notes are issued by the Treasury or RBI circulate as unlimited Legal Tender. It cannot be converted into metal. It is also known as a managed currency standard.

Question 3.
Write a note on cryptocurrency.
Answer:
A digital currency in which encryption techniques are used to regulate the generation of units of currency and verify the Transfer of Funds, operating independently of a Central Bank.

Question 4.
What are the Four alternative measures of the money supply?
Answer:
M₁ = Currency coins and demand deposits.
M₂ = M₁ + Savings deposits with Post Office Savings banks.
M₃ = M₂ + Time deposits of all commercial and co-operative banks.
M₄ = M₃ + Total deposits with Post Offices.
M₁ and M₂ are known as narrow money.
M₃ and M₄ are known as broad money.

Question 5.
Write a note on the currency symbol.
Answer:
The new symbol was designed by D.Udaya Kumar, IIT Bombay was selected by the Union cabinet on 15* July 2010. The new symbol is an amalgamation of Devanagri ‘Ra’ and the Roman ‘R’ without the stem. It came into use in India on 15th July 2010.

Question 6.
What is Narrow money?
Answer:
M1 and M2 are narrow money because they include currency plus demand deposits in banks and other deposits.

Question 7.
How does money increase the productivity of capital?
Answer:

1. Money is the most liquid form of capital.
2. Capital in the form of money can be put to any use.

Question 8.
Write a note Wage-Price.
Answer:
The wage-Price spiral is used to explain the cause and effect relationship between rising wages and rising prices or Inflation.

Question 9.
What are the three measures to prevent and control Inflation?
Answer:

1. Monetary measures
2. Fiscal measures and
3. Other measures.

Question 10.
Write a note on Monetary Economics.
Answer:
Currency is created by the RBI and union government. Bank deposits are created by commercial banks and cooperative banks. The demand for money is determined by a number of factors such as income, price level, interest rate, etc.

Short answer questions

Question 1.
What do you mean by money? – Explain.
Answer:
Money is anything that is generally accepted as payment for goods and sendees. As a medium of exchange for repayment of debts. Money is the basis for all credit. The importance of credit has increased in all countries of the world. Credit instruments are used on a large scale. The use of cheques, bills of exchange, etc., has gone up.

Question 2.
What is the history of the Barter system?
Answer:
The history of the Barter system starts from 6000 BC.

1. The barter system was introduced by Mesopotamia tribes.
2. Before money was introduced, the exchange of goods took place.
3. Under the Barter system, buyers and sellers of commodities had to face a lot of difficulties.
4. Phoenicians adopted (Barter) the exchange of goods with various other cities across oceans.
5. Babylonians also developed an improved barter system (goods for goods).

Question 3.
Write a note on Money Supply.
Answer:
Money Supply is a stock variable. It plays an important role in the determination of price level and interest rates. Money supply at a point of time is stock and over a period of time, it is a Flow. So money supply is the amount of money that is in circulation in an economy at any given time.

Question 4.
What do you mean by Inflation?
Answer:
Inflation is a consistent rise in the general price level. Inflation is the rate at which the general prices for goods and services are rising and consequently, the purchasing power of currency is falling.

Question 5.
Write a Note of Deflation.
Answer:
The important features of deflation are: (a) Falling prices, (b) Reduces Money supply, (c) Unemployment. In the case of Inflation falling prices are desirable but that should not lead to a fall in the level of production and Employment. But if prices fall from the level of full employment both Income and Employment will be affected adversely.

Long answer questions

Question 1.
Measures to Control Inflation – Explain.
Answer:
Keynes and Milton Friedman together suggested three measures to prevent and control inflation.
They are:

1. Monetary Measures
2. Fiscal Measures (J.M. Keynes)
3. Other Measures

Monetary Measures: Three measures are adopted by RBI. They are

1. Increase in Bank rate.
2. Sale of Government securities in the open market.
3. Higher Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR).
4. Consumer Credit Control and
5. Higher Margin requirements
6. Higher Repo Rate and Reverse Repo Rate.

Fiscal Measures: This measure is considered important to handle or an instrument to handle inflationary situations.
Anti-Inflationary Fiscal Measure is:

1. Reduction of Government Expenditure
2. Public Borrowing and Enhancing Taxation

Other Measures: It is divided into two
(a) Short-Term Measures
(b) Long-Term Measures
(a) Short-Term Measures: It is the distribution of essential products to the public through Fair Price (Rationing) Shops. Whenever shortages occur in India for basic goods, the goods are imported to avoid Inflation.
(b) Long-Term Measures: To accelerate economic growth especially for wage goods which has a direct bearing on the general price level and the cost of living. Restrictions on present Consumption may help in improving saving and investment so that the rate of Economic growth will be accelerated in the Longrun.

Multiple-choice questions

1. Barlir system was introduced by:
(a) Mesopotamia Tribes
(b) Baby Lonians
(c) Russians
(d) Americans
Answer:
(a) Mesopotamia Tribes

2. Currency notes are issue by in India.
(a) SBI
(b) RBI
(c) ICICI
(d) IDBI
Answer:
(b) RBI

3. Trade cycle is classified into Phases.
(a) 1
(b) 2
(c) 3
(d) 4
Answer:
(d) 4

4. Marshall’s Equation is:
(a) M = PKY
(b) M = KPY
(c) MV = PT
(d) MV = M’P’
Answer:
(b) M = KPY

5. …………. is the Liquid asset.
(a) Water
(b) Milk
(c) Money
(d) All of these
Answer:
(c) Money

6. When there is an increase in price rapidly, it is called as:
(a) Recession
(b) Hyper Inflation
(c) Galloping Inflation
(d) Creeping Inflation
Answer:
(b) Hyper Inflation

7. ‘Inflation is Taxation’ without Legislation was defined by:
(a) Alfred Marshall
(b) Keynes
(c) Adam Smith
(d) Milton Friedman
Answer:
(d) Milton Friedman

8. Money supply is the total amount of money in:
(a) Sector
(b) Economy
(c) World
(d) Household
Answer:
(b) Economy

9. The rupee symbol came into use on:
(a) 15th July 2010
(b) 16th July 2010
(c) 20th July 2010
(d) 1st July 2010
Answer:
(a) 15th July 2010

10. The Purchasing power of money, the book was published in:
(a) 1931
(b) 1921
(c) 1911
(d) 1941
Answer:
(c) 1911

11. …………. is the general form of Equation by Fisher.
(a) MV = PT
(b) M’V’ = PT
(c) M = KPY
(d) N = P/K
Answer:
(a) MV = PT

12. Inflation will slow down during:
(a) Recession
(b) Depression
(c) Stagflation
(d) Disinflation
Answer:
(d) Disinflation

13. The Economic activity becomes very slow during:
(a) Boom
(b) Depression
(c) Recovery
(d) Recession
Answer:
(b) Depression

14. ………… is the Fraction of deposits of Commercial Banks with RBI.
(a) SLR
(b) CDR
(c) CRR
(d) RDR
Answer:
(c) CRR

15. …………. is the Branch of Economics which provides a framework for analyzing money.
(a) Fiscal Policy
(b) Monetary Economics
(c) Macro Economics
(d) Micro Economics
Answer:
(b) Monetary Economics

16. …………. is an alternative to the cash.
(a) Gold
(b) Silver
(c) Plastic money
(d) Cheque
Answer:
(c) Plastic money

17. The first Hyper Inflation of the 21st Century was:
(a) April 2009
(b) April 2008
(c) April 2006
(d) April 2007
Answer:
(d) April 2007

18. Which of the following is a must for anything to be called money:
(a) Measure of deferred Payment
(b) Medium of Exchange
(c) Store of Value
(d) Measure of Value
Answer:
(b) Medium of Exchange

19. Money is suitable for storing wealth because:
(a) It requires less space
(b) If is readily acceptable for exchange
(c) It is easily portable
(d) All the above
Answer:
(d) All the above

20. Supply of money refers to Quantity of Money:
(a) During the year only
(b) During any period of time
(c) As on 31st March only
(d) As on any point of time
Answer:
(d) As on any point of time

21. Money Supply refers to:
(a) Currency outside banks and all bank deposits
(b) Currency inside bank
(c) Currency outside banks and demand deposits in bank
(d) Currency outside and Inside bank
Answer:
(c) Currency outside banks and demand deposits in bank

22. Money has made possible:
(a) Borrowing and Lending
(b) Creation of Financial Institutions
(c) Keeping of accounts
(d) All the above
Answer:
(d) All the above

23. Which of the following makes a financial Institution, a Bank:
(a) Accepting Deposits
(b) Lending
(c) Accepting demand Deposits
(d) Accepting time deposits
Answer:
(c) Accepting demand Deposits

24. Creation of money by Commercial Banks refers to:
(a) Creation of Bank deposits
(b) Issuing Currency
(c) Both (a) & (b)
(d) All the above
Answer:
(a) Creation of Bank deposits

25. How much money are banks able to create is determined by:
(a) Initial deposits
(b) SLR
(c) CRR
(d) All the above
Answer:
(d) All the above

26. The value of money multiplier equals:
(a) 1/SLR
(b) 1/CRR
(c) 1/(SLR+CRR)
(d) None
Answer:
(c) 1/(SLR+CRR)

27. Given CRR = 4% and SLR = 16%, the value of multiplier is:
(a) 25
(b) 26
(c) 5
(d) 10
Answer:
(c) 5

28. When the central bank sells securities, in the market, the credit creation capacity of the commercial bank is likely to:
(a) Rise
(b) Fall
(c) May rise or fall
(d) No effect
Answer:
(b) Fall

29. Lowering of CRR by Central Bank has the following impact on credit creation:
(a) Negative
(b) Positive
(c) Neutral
(d) No Effect
Answer:
(b) Positive

30. Raising Reverse Repo Rate by the Central Bank is likely to have the following impact on demand for goods and services in the Economy: ,
(a) Rises
(b) Falls
(c) All Effects
(d) No Effect
Answer:
(b) Falls

31. With Lowering Margin requirements by the Central Government, the borrowing capacity of the borrowers:
(a) Rises
(b) Falls
(c) Both rise and fall
(d) No Effect
Answer:
(a) Rises

32. Which of the following is a Bank?
(a) Post Office Savings Bank
(b) SBI
(c) UTI
(d) IDBI
Answer:
(b) SBI

33. Name the instrument through which commercial bank remit money to distant places:
(a) Letter
(b) Telex
(c) Cell Phone
(d) Demand Draft
Answer:
(d) Demand Draft

34. What is the facility of drawing more money from banks by businessmen?
(a) Demand Draft
(b) Fixed Deposit
(c) Over Draft
(d) Mail Transfer
Answer:
(c) Over Draft

35. Name the institution which acts as a custodian of Foreign Exchange reserves:
(a) Central Bank
(b) RBI
(c) None
(d) Both (a) & (b)
Answer:
(d) Both (a) & (b)

36. Name the institution which performs the function of a clearinghouse:
(a) RBI
(b) IDBI
(c) SBI
(d) UTI
Answer:
(a) RBI

Students get through the TN Board 12th Economics Important Questions Chapter 4 Consumption and Investment Functions which is useful for their exam preparation.

TN State Board 12th Economics Important Questions Chapter 4 Consumption and Investment Functions

Very short answer questions

Question 1.
What do you mean by investment function?
Answer:
It is investment – interest rate relationship. I = f(R) I – Investment (Dependent variable) R – Rate of interest (Independent variable).

Question 2.
What do you mean by windfall gains or losses?
Answer:
Unexpected changes in the stock market leading to gains or losses tend to shift the consumption function upward or downward.

Question 3.
What do you mean by investment?
Answer:
Investments mean the purchase of stocks and shares, debentures, government bonds, and equities.

Question 4.
What is investment according to Keynes?
Answer:
According to Keynes, it is an only a financial investment and not a real investment. This type of investment does result in an addition to tHe stock of real capital of the Nation.

Question 5.
What is Autonomous investment?
Answer:
It is the expenditure on capital formation, which is independent of the change in income, rate of interest or rate of profit.

Question 6.
Write a note on autonomous investment.
Answer:
Autonomous investment is one of the key concepts in welfare economics. In times of economic depression, the governments try to boost autonomous investments.

Question 7.
What do you mean by induced investment?
Answer:
Induced investment is the expenditure on fixed assets and stocks which are required when the level of income and demand in any economy goes up.

Question 8.
MEC depends on two factors. What are they?
Answer:
The prospective yield from a capital asset and the supply price of a capital asset.

Question 9.
Name the factors that are taken into consideration while making any investment decisions.
Answer:
MEC:

1. The cost of the capital asset
2. The expected rate of return from MEC during its lifetime
3. The market rate of interest

Question 10.
What is full employment situations?
Answer:
Under the conditions of full employment, resources are fully employed. So additional investment will lead to inflation only, rather than the generation of additional income.

Question 11.
Name the kinds of multipliers.
Answer:
Tax multipliers, employment multipliers, Foreign trade multipliers, and Investment multipliers.

Question 12.
What are the accelerator effects?
Answer:

1. Increase in consumer demand.
2. Films get close to full capacity.
3. Films invert to meet rising demand.

Question 13.
What are Super multipliers?
Answer:
The Super multipliers are greater than the simple multiplier which includes only autonomous investments and no induced investment, while super multipliers include investments.

Short answer questions

Question 1.
What are the features of autonomous investments?
Answer:

1. Investments that are not dependent on National income.
2. Mainly done with the welfare motive and not for making profits.
3. Example: Construction of roads and bridges.
4. Not affected by rest in raw material or wages of workers.
5. Essential to the development of Nation and out of depression.

Question 2.
Write a note on Induced investments.
Answer:
It is profit-motivated. It is related to the changes in national income. The relationship between the National income and Induced investment is positive, decreases in National income lead to a decrease in induced investment and vice versa. Induced investment is income elastic. It is positively sloped.

Question 3.
Write a note on the marginal efficiency of capital.
Answer:
It is the rate of discount which makes the discount present value of the expected income stream equal to the cost of capital. It was first introduced by J.M.Keynes in 1936 as an important determinant of Autonomous investment. The MEC is the expected profitability of an additional capital asset.

Question 4.
Differentiate – Positive and Negative multiplier.
Answer:

Question 5.
Differentiate between the static multiplier and dynamic multiplier.
Answer:

Question 6.
What are the assumptions of the accelerator?
Answer:

1. Absence of excess capacity in consumer goods industries.
2. Constant capital-output ratio.
3. An increase in demand is assumed to be permanent.
4. The supply of funds and other inputs is quite elastic.
5. Capital goods are perfectly divisible in any required size.

Long answer questions

Question 1.
Explain consumption function.
Answer:
It is the functional relationship between two aggregates i.e., Total consumption and Gross national income. C = f(Y).
C = Consumption, Y = Income, f = Function. It is the relationship between C and Y C = dependent Y = independent variables. It is also known as MPC. The consumption function is a schedule of the various amounts of consumption expenditure corresponding to different levels of income.

If we take C = 100 + 0.8Y then MPC = 0.8. Here if Y = 0, C = 100, If
Y = 100, C = 180. If Y = 200, C = 260. If Y = 300, C = 340 (MPC = \(\frac{\Delta \mathrm{C}}{\Delta \mathrm{Y}}\) = 0.8). In mathematical terms, C = a + by or C = 20 + 0.8Y where a > 0 and b < 1.
C = Consumption
A = Constant or intercept
Y = Income
b = MPC = \(\frac{\Delta \mathrm{C}}{\Delta \mathrm{Y}}\)
Here, when Y = 120, C = 120 (Point B is the diagram)
When Y = 180, C = 170, S = 10 (Point S is the diagram)
If Y increases to 360, C = 320, S = 40

In the diagram, income is measured on X-axis and consumption on Y-axis. In the 45° line at all levels, income and consumption are equal. It is a linear consumption. The 45° line is regarded as a zero-saving line. It measures both amounts consumed and saved. The shape of the line indicates the division of income between consumption and saving.

Question 2.
Write the determinants of the investment function.
Answer:
According to classical economists, investments depend exclusively on the rate of interest. But in reality, investments depend on a No. of factors. They are

1. Rate of interest
2. Level of uncertainty
3. Political environment
4. Rate of growth of population
5. The stock of capital goods
6. The necessity of new products
7. Level of income of investors
8. Inventions and innovations
9. Consumer demand
10. Policy of the state
11. Availability of capital
12. Liquid assets of the investors

Keynes contended that business expectations and profits are more important in deciding investment. He also pointed out that investment depends on MEC and the rate of interest.

Question 3.
Explain the factors on which MEC is dependent.
Answer:
Marginal Efficiency of capital depends on two factors
(i) The prospective yields from a capital asset
(ii) The supply price of a capital asset The MEC is influenced by
(a) Short-run factors
(b) long-run factors
(a) Short-run factors:

1. Demand for products: The rate of return from the investment will be high if the market for a particular good grows and costs are likely to fall. But if entrepreneurs expect a fall in demand for goods and a rise in cost, the investment will decline.
2. Liquid assets: If entrepreneurs have more capital, thus take advantage of more investment.
3. Sudden change in income: If the income of the entrepreneur increases, there will be a high investment in the country.
4. The current rate of investment: If the rate of investment in a particular industry is very large, the MEC will below.
5. Waves of optimism and pessimism: When businessmen are optimistic, MEC increases and when they are pessimistic, MEC is low.

(b) Long-run factors:

1. Rate of growth of population: When the population grows rapidly, MEC will increase and investment is discouraged and MEC will reduce.
2. Technological progress: This will increase investment and MEC.
3. Monetary and fiscal policies: The policy of cheap money and liberal tax will give more profit and MEC will be high.
4. Political environment: The political stability and administration will improve MEC.
5. Resource availability: The supply of more Natural resources will increase the Marginal Efficiency of Capital.

Question 4.
Write the assumption of the multiplier.
Answer:
Assumptions of Keynes theory of multiplier.

1. There is a change in autonomous investment.
2. The marginal propensity to consume is constant.
3. There is no induced investment.
4. Consumption is a function of current income.
5. Consumer goods are available in response to effective demand for them.
6. There is a closed economy unaffected by foreign influences.
7. There are no changes in prices.
8. There is less than full employment level in the economy.

Question 5.
Explain the relationship between the rate of interest and investment.
Answer:
Higher rates of interest will reduce the investment because higher rates increase the cost of borrowing and require investment to have a higher rate of return to be profitable.

Explanation of the diagram:
When the real cost of borrowings rises, few investment projects are profitable. If interest rates increase from 5% to 8%, then we get a fall in the amount of investment from Rs. 100cr to Rs. 80cr. The increase in interest rates will discourage investment because investment has a higher opportunity cost.

1. It is more expensive to borrow money from the bank when interest rates are higher.
2. Saving money in the bank gives a higher rate of return. So using savings to finance investment has an opportunity cost of lower interest payments.
3. If interest rates increase, firms will gain a better rate of return to justify the cost of borrowing using savings.

Question 6.
Explain MEC and Multiplier.
Answer:
The MPC refers to the relation between change in consumption (c) and change in income(Y).
Symbolically MPC = \(\frac{\Delta \mathrm{C}}{\Delta \mathrm{Y}}\)
The value of the multiplier depends on MPC.
Multiplier (K) = 1/1-MPC
The multiplier is the reciprocal of one minus marginal propensity to consume. Since marginal propensity to save is 1 – MPC. (MPC+MPS =1). The multiplier is 1/ MPS. The multiplier is therefore defined as reciprocal of MPS. The multiplier is inversely related to MPS and directly with MPC.
Numerically if MPC is 0.75, MPS is 0.25 and k is 4.
Using formula K = 1 /1 – MPC
1 / 1 – 0.75 = 1 / 0.25 = 4

Taking the following values, we can explain the functioning of multiplier.

C = 100 + 0.8 Y; I = 100
I = 10
Y = C + I
= 100 + 0.8Y + 100
0.2Y = 200
Y = 1000
Here, C = 100 + 0.8Y = 100 + (1000) = 900;
S = 100 = I
After I is raised by 10, now I = 110,
Y = 100 + 0.8Y + 110 .
0.2Y = 210
Y = \(\frac{210}{0.2}\) = 1050
Here C = 100 = 0.8 (1050) = 940; S = 110 = I

Diagrammatic Explanation:
At 45° line Y = C + S
It implies the variables in axis and axis are equal.
The MPC is assumed to be at 0.8
(C = 100 + 0.8Y)
The aggregate demand (C + I) curve intersects 45° line at point E.
The original national income is 500.
(C = 100 + 0.8Y = 100 + 0.8 (500) = 500)
When I is 100, Y = 1000, C = 900;
S = 100 = I
The new aggregate demand curve is
C+I =100 +0.8y+100+10
Y = \(\frac{210}{0.2}\) = 1050
C = 940; S = 110 = I

Question 7.
Explain the leakage of the multiplier.
Answer:
The multiplier assumes that those who earn income are likely to spend a proportion of their additional income on consumption. But in practice, people spend it on other items such expenses are known as leakages.

1. Payment towards past debts: Repayment of old loans, then MPC is reduced and the value of the multiplier is cut.
2. Purchase of existing wealth: Income is used for the purchase of land, buildings, etc., the money is circulated among people and does not consume. So the value of the multiplier is affected.
3. Import of goods and services: This money spent goes out of the country. Thus, imports reduce the value of the multiplier.
4. Nonavailability of consumer goods: According to multiplier theory supply of consumer goods following demand. But there is often a time lag. During this gap (d > s). inflation increases. So the consumption expenditure and the multiplier value decreases.

Question 8.
Write the uses of multipliers.
Answer:

1. Multiplier highlights the importance of investment in income and employment theory.
2. It gives importance to the different stages of the trade cycle.
3. It also helps in bringing equality between S and I.
4. It helps in formulating government policies.
5. Multipliers help to reduce unemployment and achieve full employment.

Activity
Question 1.
How do you calculate MPC from the consumption function?
Answer:
Consumption function or Propensity to consume. It is between two aggregates that is
(i) Total consumption and
(ii) Gross national income
C = f( Y)
MPC is the ratio of change iaconsumption to a change in income MPC = ΔC/ΔY
Consumption function is C = C₀ + bY
(i) C₀ is called autonomous consumption that is consumption is positive at zero levels of income.
(ii) The coefficient b measures the slope of consumption (The slope of consumption function gives the increase in consumption per unit increase in income). This is Marginal Propensity to Consume. So whenever there is an increase in consumption function, the MPC changes or MPC increases. Consumption changes by b for every rupee one change in income.
Solution:
Consumption changes in the same direction as income C = a + bY
C Consumption, a = Autonomous consumption (when the income is zero). b = slope of the consumption curve and Y = income. MPC is the ratio change in consumption to change in income. MPC = ΔC / ΔY
The value of MPC always lies between 0 and 1 that is 0 < MPC < 1. When income increases, then MPC also increases.
Propensity to consume:

Multiple choice questions

1. Consumption function and investment function play a vital role in influencing:
(a) MPC
(b) MPS
(c) NFIA
(d) National income
Answer:
(d) National income

2. The consumption function is the relationship between the consumption expenditure and the:
(a) Per capita Income
(b) National income
(c) NFIA
d) Disposable income
Answer:
(b) National income

3. In consumption function, the 45° line is regarded as:
(a) Price line
(b) Demand line
(c) Supply line
(d) Zero saving line
Answer:
(d) Zero saving line

4. The keynes psychological law operates in ……….. economy
(a) Socialist
(b) Mixed
(c) Traditional
(d) Capitalist
Answer:
(d) Capitalist

5. According to keynes proposition of psychological law of consumption, when income increases, ………… also increases by smaller amount.
(a) Consumption expenditure
(b) Investment expenditure
(c) Savings
(d) Demand
Answer:
(a) Consumption expenditure

6. J.M.Keynes has divided factors influencing the consumption function into:
(a) 4
(b) 2
(c) 3
(d) 5
Answer:
(b) 2

7. Subjective factors are internal and related to ……….. feelings.
(a) Physical
(b) Bad
(c) Negative
(d) Psychological
Answer:
(d) Psychological

8. Objective factors are the factors.
(a) Internal
(b) Subjective
(c) External
(d) Normal
Answer:
(c) External

9. ………. has made two observations regarding the factors affecting consumption.
(a) Adam smith
(b) J.M.Keynes
(c) Duesenberry
(d) Alfred Marshall
Answer:
(c) Duesenberry

10. There is a function and ……….. relationship between rate of interest and investment.
(a) Positive
(b) Inverse
(c) Normal
(d) Straight
Answer:
(b) Inverse

11. The autonomous investment curve is:
(a) Upward sloping
(b) Downward sloping
(c) Horizontal
(d) Vertical
Answer:
(c) Horizontal

12. Generally government makes autonomous investment because of ………… consideration.
(a) Human
(b) Welfare
(c) Ospecious
(d) Individual
Answer:
(b) Welfare

13. induced investment is income elastic and it is ………… sloped.
(a) Negatively
(b) Upward
(c) Downward
(d) Positively
Answer:
(d) Positively

14. Induced investment is ………. motivated.
(a) Profit
(b) Sales
(c) Loss
(d) Production
Answer:
(a) Profit

15. The classical economist believed that investment depends on:
(a) Rate of savings
(b) Rate of investment
(c) Rate of interest
(d) Rate of consumption
Answer:
(c) Rate of interest

16. MEC was 1st introduced by J.M.keynes in:
(a) 1936
(b) 1966
(c) 1956
(d) 1996
Answer:
(a) 1936

17. MEC is also influenced by the rate of growth of:
(a) Agriculture
(b) Industries
(c) Population
(d) Supply
Answer:
(c) Population

18. The concept of multiplier was first developed by:
(a) J.M.Keynes
(b) R.F.Khan
(c) Ricardo
(d) Samuelson
Answer:
(b) R.F.Khan

19. Under static multiplier, the change in investment and the resulting change in income are:
(a) Continuous
(b) Discontinuous
(c) Simultaneous
(d) Changing
Answer:
(c) Simultaneous

20. Dynamic multiplier is also known as:
(a) Super multiplier
(b) Sequence multiplier
(c) Timeless multiplier
(d) Logical multiplier
Answer:
(b) Sequence multiplier

21. The additional income spent on other items are known as:
(a) Wealth
(b) Inflation
(c) Investment
(d) Leakages
Answer:
(d) Leakages

22. …….. reduces the value of the multiplier.
(a) Demand
(b) Imports
(c) Exports
(d) Supply
Answer:
(b) Imports

23. Simple accelerator model was made by J.M.CIark in:
(a) 1915
(b) 1916
(c) 1917
(d) 1918
Answer:
(c) 1917

24. The combined effect of the multiplier and the accelerator is also called as:
(a) Veblen effect
(b) Griffen paradox
(c) Leverage effect
(d) Multiplier effect
Answer:
(c) Leverage effect

25. Theory of income determination is based on:
(a) Ex-ante variable
(b) Ex-post variable
(c) Both (a) and (b)
(d) None of the above
Answer:
(a) Ex-ante variable

26. MPC equals to:
(a) C/Y
(b) ΔC / ΔY
(c) 1 – C/Y
(d) ΔC / ΔY
Answer:
(b) ΔC / ΔY

27. MPS equals to:
(a) 1 – MPC
(b) ΔS/ΔY
(c) Δ(Y – C) / ΔY
(d) All the above
Answer:
(d) All the above

28. Aggregate consumption expenditures includes this type of expenditure:
(a) Autonomous
(b) Induced
(c) Accumulation
(d) Both autonomous and induced
Answer:
(d) Both autonomous and induced

29. Aggregate saving in the economy is:
(a) Positive throughout
(b) Positive and then negative
(c) Negative throughout
(d) Negative initially and then positive
Answer:
(d) Negative initially and then positive

30. The Consumption function curve is:
(a) Upward sloping
(b) Downward sloping
(c) Parallel to the X-axis
(d) Parallel to the Y-axis
Answer:
(a) Upward sloping

31. When AD exceeds AS, the inventories tend to:
(a) Rise
(b) Fall
(c) Rise initially and fall
(d) Remain unchanged
Answer:
(b) Fall

32. Value of multiplier is determined by:
(a) MPS
(b) MPC
(c) Both (a) and (b)
(d) Investment
Answer:
(c) Both (a) and (b)

33. If MPC = MPS, the value of multiplier is:
(a) 0
(b) 1
(c) 2
(d) Infinity
Answer:
(c) 2

Pick the odd one out.

1. …………… plays a vital role in influencing national income.
(a) Consumption function
(b) Investment function
(c) Consumption
(d) Price
Answer:
(d) Price

2. ………… is a functional relationship between two aggregates.
(a) Consumption function
(b) Propensity function
(c) Aggregate demand
(d) Total consumption
Answer:
(c) Aggregate demand

3. The Average Propensity to Consume =
(a) C/Y
(b) S/Y
(c) ΔC / ΔY
(d) dY / dX
Answer:
(d) dY / dX

4. The economy is faced with abnormal circumstances like:
(a) War
(b) Revolution
(c) Hyperinflation
(d) Habits
Answer:
(d) Habits

5. The constant variables are:
(a) Tastes
(b) Social customs
(c) Income distribution
(d) Profit
Answer:
(d) Profit

6. The unforeseen contingencies are:
(a) Accident
(b) Injury
(c) Sickness
(d) Demand
Answer:
(d) Demand

7. Keynes sums up the motives as:
(a) Precaution
(b) Calculation
(c) Foresight
(d) Income
Answer:
(d) Income

8. Major objective factors influencing consumption functions are:
(a) Price level
(b) Wage level
(c) Supply level
(d) Interest rate
Answer:
(c) Supply level

9. The term investment means:
(a) Purchase of stock and shares
(b) Debentures
(c) Government bonds
(d) Production
Answer:
(d) Production

10. Private investment is an increase in the capital stock such as:
(a) Buying raw material
(b) Buying a factory
(c) Buying a machine
(d) Buying a house
Answer:
(d) Buying a house

11. The origin of the accelerator principle can be traced back in the writing of:
(a) Afflation
(b) Hawtere
(c) Adam smith
(d) Bickerdike
Answer:
(c) Adam smith

Students get through the TN Board 12th Economics Important Questions Chapter 3 Theories of Employment and Income which is useful for their exam preparation.

TN State Board 12th Economics Important Questions Chapter 3 Theories of Employment and Income

Very short answer questions

Question 1.
How does Keynes define Full employment?
Answer:
Keynes defines Full employment as the absence of involuntary unemployment.

Question 2.
How does Lerner define Full employment?
Answer:
“That level of employment at which any further increase in spending would result in an inflationary spiral of wages and prices”.

Question 3.
What does every economy aim at?
Answer:
Every economy in the world aims at attaining the level of full employment equilibrium where all its available resources are fully and efficiently employed to achieve the maximum level of output.

Question 4.
What is Full employment?
Answer:
The concept of full employment refers to full employment of labour force of a country.

Question 5.
What do you mean by unemployment?
Answer:
It is problem faced when there are people, who are willing to work and able to work but cannot find suitable jobs.

Question 6.
Write a note on the classical theory of employment.
Answer:
The classical theory of employment is composed of different views of classical economists on the issue of income and employment in the economy.

Question 7.
What are the assumptions of classical economist on the theory of employment?
Answer:
Classical economist assumed that the economy operates at the level of full employment without inflation in the long period, wages and prices of goods were flexible and the competitive market existed in the economy. (Laissez – Faire economy)

Question 8.
Write a note on classical theory explanation.
Answer:
This classical theory of Say’s Law explains that “A person receives his income from production which is spent on the purchase of goods and services produced by others for the economy as a whole, therefore, total production equal total income”.

Question 9.
What is the view of Keynes theory of employment in short-run?
Answer:
Keynes theory of employment was based on the view of the short run. “According to him, the factors of production such as capital goods, supply of labour, technology and efficiency of labour remain unchanged while determining the level of employment.

Question 10.
Define Keynes theory of employment.
Answer:
According to Keynes theory of employment “Effective demand signifies the money spent on consumption of goods and services and on investment. The total expenditure is equal to the national income, which is equivalent to national output”.

Question 11.
What are the three motives of liquidity preference?
Answer:

1. Transaction motive
2. Precautionary motive
3. Speculative motive.

Question 12.
What do you mean by desired demand in the economy?
Answer:
The desired demand in the economy is the sum of the total desired Private consumption, expenditure, desired investment – expenditure desired
government spending, and desired net exports. Thus, the desired spending is called aggregate spending.
AD = C + I + G + (X – M)

Question 13.
Write a note on aggregate supply.
Answer:
Aggregate supply refers to the value of the total output of goods and services produced in an economy in a year.

Question 14.
What is aggregate supply price?
Answer:
Aggregate supply price is the total amount of money that all entrepreneurs in an economy except to receive from the sale of output produced by a given number of labourers employed.

Question 15.
What are the two approaches to the determination of the equilibrium level of income in Keynesian theory?
Answer:

1. Aggregate demand – Aggregate supply approach
2. Saving – investment approach

Short answer questions

Question 1.
Explain the classical theory of unemployment.
Answer:

1. It is about different views of classical economists on Income and employment in the economy.
2. According to classical economists, the economy operates at the level of full employment without inflation for a long period.
3. The classical economists assumed that wages and prices of goods were flexible and these existed a competitive market in the economy. (Laissez – Faire Economy)

Question 2.
“Say’s the law of markets is the core of the classical theory of employment” explains.
Answer:
J.B. Say a French economist and an industrialist was influenced by Adam Smith and David Ricardo. J.B.Say enunciated the proposition that “supply creates its own demand” so there cannot be general overproduction or the problems of unemployment in the economy.

Question 3.
Write a note on Ex ante and Export in Say’s Law.
Answer:
“Supply creates its own demand or equivalently that the aggregate investment equals the aggregate saving holds good in the export because it is an accounting identity. According to Say’s law, these two are equal in exantisense. That is the total quantity which people produce that is aggregate supply must be equal to the total quantity which they plan to buy that is aggregate demand.

Question 4.
Write a note on the theory of Keynes.
Answer:
There was a turning point in the development of modem economic theory after the publications of “The general theory of employment interest and Money” published in 1936. He was against the belief of classical economists. He not only criticized the belief of classical economist that the market forces in capitalist economy adjust themselves to attain equilibrium, he also gave his own theory of employment.

Question 5.
Write a note of effective demand.
Answer:
The principle of effective demand is the starting point of Keynes theory of employment and income. It denotes money actually spent by the people on products of industry. The money received by the entrepreneurs is paid in the form of rent, wages, interest and profit. So the Effective demand = National income.

Long answer questions

Question 1.
Explain the assumptions of Say’s Law of market.
Answer:

1. No single buyer or seller of a commodity or an input can affect the price.
2. Full employment.
3. People are motivated by self-interest and self-interest determines economic decisions.
4. The laissez-faire policy is essential for an automatic and self-adjusting process of full employment equilibrium. Market forces determine everything right.
5. There will be perfect competition in labour and product market.
6. There is wage-price flexibility.
7. Money acts only as a medium of exchange.
8. Long-run analysis.
9. There is no possibility for overproduction or unemployment.

Question 2.
Explain the criticisms of Say’s Law of market.
Answer:

1. According to Keynes, supply does not create its demand. It is not applicable where demand does not increase as much as production increases.
2. The automatic adjustment process will not remove unemployment. Unemployment can be removed by an increase in the rate of investment.
3. Money is not neutral. Individuals hold money for unforeseen contingencies while businessmen keep a cash reserve for future activities.
4. Say’s law is based on the proposition that supply creates its own demand and there is no overproduction. Keynes said that overproduction is possible.
5. Keynes regards full employment as a special case because there is under-employment in capitalist economies.
6. The need for state intervention arises in the case of general overproduction and mass unemployment.

Question 3.
Write a note on John Maynard Keynes.
Answer:
John Maynard Keynes was one of the most influential economists of the 20th century. He was born in Cambridge in 1883. In addition to his work as an economist, he held a position as civil servant a director of the Bank of England and leader of the British delegation of negotiators at the Bretton Woods conference at points in his career. Economic theory based on his idea is known as Keynesian economics, and remain highly influential today, particularly in the field of macroeconomics.

Question 4.
According to the Keynes theory of employment, what does effective demand signifies and determines?
Answer:

1. It signifies the money spent on the consumption of goods and services on investment.
2. The relationship between employment and output of an economy depends upon the level of effective demand which is determined by the forces of aggregate supply and aggregate demand.
3. The level of employment in the economy is determined by effective demand.
4. The effective demand will be determined by two determinants, like consumption and investment expenditure.
5. The rate of interest and the marginal efficiency of capital determines the investment levels.

Activity

Question 1.
List out the persons in your village or ward who are fully unemployment, partially unemployed and underemployed.
Answer:
This activity helps the students:

1. To make decisions about their career in life.
2. To analyze the prevailing employment situations in society.
3. To develop a deep understanding of the importance of education.
4. To take the right decisions about the choice of job opportunities.
5. To understand clearly about the need of the hour.
6. Career Importance and choice of qualification.

Multiple choice questions

1. ………… is one of the greatest and most influential economists of mid 20th century.
(a) J.B. Say
(b) Adam smith
(c) J.M. Keynes
(d) Alfred Marshall
Answer:
(c) J.M. Keynes

2. Every economy aims at attaining:
(a) Overall development
(b) Equilibrium
(c) Full population
(d) Full employment equilibrium.
Answer:
(d) Full employment equilibrium.

3. Interest flexibility brings equality between:
(a) Income and consumption
(b) Savings and investment
(c) Demand and supply
(d) Labour and capital
Answer:
(b) Savings and investment

4. Demand creates its own supply was said by:
(a) Democratic
(b) Classical economist
(c) Keynesianism
(d) J.B. Say.
Answer:
(c) Keynesianism

5. Cyclical unemployment exists during the downtown phase of:
(a) Business
(b) Economy
(c) Unemployment
(d) Trade cycle
Answer:
(d) Trade cycle

6. Cyclical unemployment can be cured by:
(a) Public investment
(b) Full employment
(c) Education
(d) Increase in income
Answer:
(a) Public investment

7 devices are responsible for technological unemployment.
(a) Capital saving
(b) Labour saving
(c) Money saving
(d) Time-saving
Answer:
(b) Labour saving

8. Disguised unemployment is found in:
(a) Industries
(b) Firms
(c) Services
(d) Agriculture
Answer:
(d) Agriculture

9. Adam Smith wrote the book “An enquiry into the nature and causes of the wealth of nations” in the year:
(a) 1786
(b) 1776
(c) 1766
(d) 1756
Answer:
(b) 1776

10. Every economy in the world aims at attaining the level of :
(a) Full employment
(b) Unemployment
(c) Seasonal unemployment
(d) Disguised unemployment
Answer:
(a) Full employment

11. Keynes theory of employment and income is the principle of:
(a) Long run
(b) Short period
(c) Short-run
(d) Long period
Answer:
(c) Short-run

12. Effective demand is equal to:
(a) National income
(b) Gross income
(c) Personal income
(d) Per capita income
Answer:
(a) National income

13. The entrepreneur is encouraged to employ:
(a) More capital
(b) More investment
(c) More labour
(d) More income
Answer:
(c) More labour

14. ……….. was set up in July 1982.
(a) NABARD
(b) ARDC
(c) IMF
(d) RBI
Answer:
(a) NABARD

15. A person receives his income from:
(a) Consumption
(b) Distribution
(c) Production
(d) Exchange
Answer:
(c) Production

16. Under Say’s law of the market, there will be …………. in labour and product market.
(a) Imperfect competition
(b) Perfect competition
(c) Monopoly competition
(d) Monopolistic competition
Answer:
(b) Perfect competition

17. According to Keynes, the automatic adjustment process will not remove :
(a) Poverty
(b) Illiteracy
(c) Underemployment
(d) Unemployment
Answer:
(d) Unemployment

18. Keynes book ” The general theory of employment, interest and money was published in:
(a) 1936
(b) 1946
(c) 1956
(d) 1965
Answer:
(a) 1936

19. ED = …………
(a) Y = C + I = Output = Employment
(b) Y = C + I + S = Output
(c) Y = I + S = Output = Employment
(d) Y = C + I = Employment
Answer:
(a) Y = C + I = Output = Employment

20. In the Keynesian model, the output is determined mainly by:
(a) Effective demand
(b) Aggregate demand
(c) Aggregate supply
(d) Marginal propensity to consume
Answer:
(b) Aggregate demand

21. AD = C + I + ………
(a) C + I + G + (X + M)
(b) C + I + G + (X ÷ M)
(c) C + I + S + (X – M)
(d) C + I + G + (X – M)
Answer:
(d) C + I + G + (X – M)

22. The term ………… refers to the amount of money received from the sale of output.
(a) Price
(b) Demand
(c) Supply
(d) Profit
Answer:
(a) Price

23. Aggregate supply = C + S + T + Rf = ………….
(a) Aggregate demand generated in the economy.
(b) Aggregate supply generated in the economy.
(c) Aggregate income generated in the economy.
(d) Aggregate price generated in the economy.
Answer:
(c) Aggregate income generated in the economy.

24. The slope of the aggregate supply curve depends on the relation between the:
(a) Employment and income
(b) Employment and productivity
(c) Employment and distribution
(d) Employment and market
Answer:
(b) Employment and productivity

25. ………… is an important factor in determining the level of economic activity.
(a) Aggregate demand
(b) Aggregate supply
(c) Effective demand
(d) Aggregate price level
Answer:
(b) Aggregate supply

26. The expected rate of return over costs of a new capital good is:
(a) Marginal efficiency of capital
(b) Marginal propensity to consume
(c) Effective demand
(d) Aggregate demand
Answer:
(a) Marginal efficiency of capital

27. When resources are not fully utilized in production is known as:
(a) Aggregate demand
(b) Disguised unemployment
(c) Full employment
(d) Underemployment
Answer:
(d) Underemployment

28. Theory of income determination is based on:
(a) Ex – ante variable
(b) Ex – post variable
(c) Both (a) and (b)
(d) None of the above
Answer:
(a) Ex – ante variable

29. Aggregate supply is same as:
(a) National output
(b) National income
(c) Both (a) and (b)
(d) None of the above
Answer:
(c) Both (a) and (b)

30. The migration of people from rural areas to urban areas increase the:
(a) Size of labour forces
(b) Increases the unemployment
(c) Creates open unemployment
(d) Full employment
Answer:
(d) Full employment

31. Seasonal unemployment occurs during:
(a) Seasons of the year
(b) Particular time in a year
(c) Offseason
(d) All the time in a year
Answer:
(d) All the time in a year

32. Frictional unemployment arises due to:
(a) Imbalance between supply and demand for labour
(b) Immobility of labour
(c) Break down of machinery
(d) Profit maximization
Answer:
(d) Profit maximization

33. Educated people are unemployed because:
(a) Qualification does not match the job
(b) Faulty education system
(c) Lack of employable skills
(d) Prices are very high
Answer:
(d) Prices are very high

34. Structural unemployment is because:
(a) Jobs are highly responsible
(b) Drastic change in the structure of the society
(c) Lack of demand for the product
(d) Shift in demand
Answer:
(a) Jobs are highly responsible

35. Classical economists assumed that the economy operates at the level of full employment:
(a) Without inflation in the long period.
(b) Wages and prices of goods were flexible.
(c) Marginal productivity of labour is zero.
(d) Competitive market existed in the economy.
Answer:
(c) Marginal productivity of labour is zero.

36. Unemployment can be removed by:
(a) Investment
(b) Rate of investment
(c) Supply of labour
(d) Increase in rate of investment
Answer:
(c) Supply of labour

37. Say’s law is based on the proposition that:
(a) Full employment
(b) Supply creates its own demand
(c) There is no overproduction
(d) Cash reserve for future activities
Answer:
(d) Cash reserve for future activities

38. According to Keynes, the factors of production remain unchanged, they are:
(a) capital goods
(b) Supply of labour
(c) Supply of money
(d) Technology
Answer:
(c) Supply of money

39. Effective demand denotes:
(a) Money spent by the people on products
(b) The money which entrepreneurs receive
(c) National income
(d) Employment, interest and money
Answer:
(d) Employment, interest and money