Prasanna

Kerala State Board New Syllabus Plus Two Economics Chapter Wise Previous Questions and Answers Part I Chapter 1 Introduction.

Kerala Plus Two Microeconomics Chapter Wise Previous Questions Chapter 1 Introduction to Microeconomics

Question 1.
How each of the following affects the Production Possibility Curve of an Economy? (MARCH – 2008)
a) The number of employed workers increase.
b) Tsunami destroys some production facilities.
c) Introduction of capital intensive technique.
d) Increase in fuel price.
Answer:
PPC shifts outward
b) PPC shifts inwards
c) PPC shifts outwards
d) PPC shifts inwards

Question 2.
Below is given a Production Possibility Schedule (MARCH – 2008)

a) Draw the Production Possibility Curve.
b) Prepare the Marginal Opportunity cost in a table based o the PPC.
Answer:
a) 

b)

Cotton	Rice	MOC
350	0	–
300	50	50
250	75	25
170	120	45
100	150	30
50	180	30

Question 3.
Micro Economics is otherwise known as “price theory”. Do you agree with this statement? Justify your answer. (MARCH – 2009)
Answer:
Yes.
It is related to the theory of product and factor pricing.

Question 4.
Some Economic Variables are given below. Classify them in a table based on two branches of Economics. Give suitable titles to the column.
General price level, Aggregate consumption,Rent for a house in a city, Demand forfish in a local market. (MARCH – 2009)
Answer:

Micro	Macro
Rent for a house in a city	General price level
Demand for fish in a local market	Aggregate consumption

Question 5.
A production possibility schedule is given below (MAY-2010)

a) Calculate M.O.C
b) What is the shape of PPC?
Answer:
a)

b) downward slope

Question 6.
Complete the following table : (MARCH-2012)

Features of centrally planned economy	Features of market economy
1.	1.
2.	2.

Answer:

Features of centrally planned economy	Features of market economy
1. Comprehensive planning	1. Price mechanism
2. Public sector	2. Profit motive
3. Public Welfare	3. Private sector

Question 7.
Mention one example for each of the following market structures. (MARCH-2013)
i) Monopoly
ii) Monopolistic competition
Answer:
i) monopoly – Indian railway
ii) monopolistic competition – tooth paste

Question 8.
In a centrally planned economy all important decisions regarding production, exchange and consumption are taken by (MARCH-2014)
a) The Government
b) The Market
c) Either of (a) and (b)
d) The Central Bank
Answer:
The Government

Question 9.
Among the three statements given, which statement is a normative statement? (MAY-2014)
a) People work hard if wages are high.
b) The unemployment rate should be lower
c) Printing too much of money causes inflation.
Answer:
a) people work hard if wages are high.

Question 10.
Who is known as the father of modern Macro Economics? (MARCH-2015)
a) Adam Smith
b) Alfred Marshall
c) J.M.Keynes
d) J.B.Say
Answer:
c) J.M.Keynes

Question 11.
Prepare a production possibility Schedule and draw a production possibility curve on the basis of the schedule, how do you define the PPC? (MAY-2015)
Answer:
Production possibility curve is the locus of combinations of two goods that can be produced when the resources of the economy are fully utilized. Given below a production possible schedule and a production possibility curve.

Production possibilities	Wheat	Rubber
A	0	500
B	5	400
C	10	300
D	15	200
E	20	100
F	25	0

Question 12.
The choice of technology is associated with (MARCH-2016)
a) What to produce?
b) Howto produce?
c) For whom to produce
d) None of these
Answer:
b) How to produce

Question 13.
Central problems faced by an economy can be solved through different ways by different economic systems. (MAY-2016)
a) Which are the important economic systems?
b) How each system solves the central problems?
Answer:
a) Economic systems are:
i) Capitalism
ii) Socialism
iii) Mixed economy
b) Solution of central problems
i) Capitalist economy solves the central economic problems through price mechanism
ii) Socialist economy solves the central economic problems through economic planning.
iii) Mixed economy solves the central economic problems through both price mechanism and central planning.

Question 14.
Identify the curve given below. What does the points A, B, C represents? (MARCH-2017)

Answer:
Production Possibility Curve: It shows various combinations of two goods that an economy can produce with a given level of resources and a given level of technology.
Point ‘A’shows efficient utilisation of resources. Point ‘B’ We can say that at any point above the existing PPC shows the growth of resources and Point ‘C’ inside the production possibility curve implies insufficient utilisation of resources.

Question 15.
Which among the following is not a characteristics of a Capitalist Economy? (MARCH-2017)
a) Wages and prices are administered by the government.
b) Private ownership of means of production.
c) Production takes place for exchange
d) Sale and purchase of labour services at a price is called wage rate.
Answer:
Wages and prices are administered by the government.

Kerala State Board New Syllabus Plus Two Business Studies Previous Year Question Papers and Answers.

Kerala Plus Two Business Studies Previous Year Question Paper Say 2018 with Answers

Board	SCERT
Class	Plus Two
Subject	Business Studies
Category	Plus Two Previous Year Question Papers

Time : 2 1/2 Hours
Cool off time : 15 Minutes
Maximum : 80 Score

General Instructions to Candidates:

• There is a ‘cool off time’ of 15 minutes in addition to the writing time of 2 hrs.
• Your are not allowed to write your answers nor to discuss anything with others during the ‘cool off time’.
• Use the ‘cool off time’ to get familiar with the questions and to plan your answers.
• Read questions carefully before you answering.
• All questions are compulsory and only internal choice is allowed.
• When you select a question, all the sub-questions must be answered from the same question itself.
• Calculations, figures and graphs should be shown in the answer sheet itself.
• Malayalam version of the questions is also provided.
• Give equations wherever necessary.
• Electronic devices except non programmable calculators are not allowed in the Examination Hall.

Answer all questions from 1 to 7. Each carries 1 score. (7 × 1 = 7)

Question 1.
Which of the following is a function of middle level management?
a) Formulation of plans and policies.
b) Directly Oversee the efforts of workforce.
c) Cooperate with other departments for smooth functioning of the organization.
d) Analyse the Enviornment.
Answer:
c) Co-operate with other departments for smooth functioning of the organization.

Question 2.
F. W. Taylor’s functional foremanship in an extension of Henry Fayol’s function.
a) Scalar chain
b) Order
c) Division of work
d) Discipline
Answer:
c) Division of work.

Question 3.
Complete the series Globalisation: Integration of various economies of the world into a global economy.
Liberalisation: ……..?………
Answer:
Minimise governmental restrictions.

Question 4.
Which of the following is not a part of the Responsibility Centre?
a) Cost centre
b) Profit centre
C) Investment centre
d) Management centre
Answer:
d) Management centre

Question 5.
The cheapest sources of finance are………..
a) Equity share
b) Retained earnings
c) Preference share
d) Debenture
Answer:
b) Retained earnings

Question 6.
The settlement cycle in NSE is ………..
a) T + 5
b) T + 3
c) T + 2
d) T + 1
Answer:
c) T + 2

Question 7.
Which of the following firms emphasizes benefits to customers rather than product attributes?
a) Product concept
b) Market concept
c) Sales concept
d) Production concept
Answer:
b) Market concept

Answer any 7 questions from 8 to 15. Each carries 2 scores. (2 × 1 = 2)

Question 8.
Write any two personal objects of management.
Answer:

1. Give adequate remuneration to employees
2. Provide good working condition

Question 9.
“Communication from top to bottom should follow the official chain of command.”
a) Identify the principles of management mentioned above.
b) Name the shortcut proposed by Henry Fayol for speedy communication.
Answer:
a) Scalar chain
b) GangPlank

Question 10.
List out any four types of tests used in the selection process.
Answer:

1. Intelligence tests
2. Aptitude tests
3. Personality test
4. Trade test

Question 11.
Describe the concept of trading on equity.
Answer:
It refers to the use of fixed income securities such as debentures and preference capital in the capital structure so as to increase the return of equity shareholders.

Question 12.
Draw the pattern of any two types of formal communication network.
Answer:
a) Single chain: This chain network exists between a supervisor and his subordinates

b) Wheel Network: In wheel network, all subordinates under one superior communicate through him only.

Question 13.
Name any 2 important Acts framed to safeguard consumer interest in India.
Answer:

1. Consumer Protection Act 1986.
2. Prevention of Food Adulteration Act 1954.

Question 14.
Explain the importance of delegation. (any two)
Answer:

1. It reduces the workload of managers.
2. It helps employee development.

1) Reduces the work load of managers: The managers are able to function more efficiently as they get more time to concentrate on important matters.
2) Employee development: Delegation empowers the employees by providing them the chance to use their skills, gain experience and develop themselves for higher positions.

Question 15.
Give any four features of marketing.
Answer:
Features of Marketing:

1. Needs and Wants: Marketing focuses on the satisfaction of the needs and wants of consumers.
2. Creating a Market Offering: It refers to providing complete information about the product and services like name, type, price, size, etc.
3. Customer Value: A buyer analyses the cost and the satisfaction that a product provides before buying it. The seller should manufacture the product keeping in view this tendency of the customer.
4. Exchange Mechanism: The process of marketing involves the exchange of products and services. Exchange is the essence of marketing.

Answer any 4 questions from 16 to 20. Each carries 3 scores. (4 × 3 = 12)

Question 16.
Gopu argued that profit is the only organizational objectives of the business.
a) Do you agree with him?
b) Give reason
Answer:
a) No, I disagree with him
b) Other organisational objectives of the business are

• survival: Management must survive to ensure the survival of the organisation.
• Profit: Management has to ensure that the organization makes a reasonable profit.
• Growth: management must exploit fully the growth potential of the organisation.

Question 17.
“Though planning is an important tool of management, yet it is not a remedy to all problems.” Explain this statement.
Answer:
Limitations of Planning:

• Planning makes the activities rigid.
• Long term plans are insignificant in the rapidly changing business environment.
• It reduces creativity.

Question 18.
How can an organisation overcome the barriers to effective communication?
Answer:
Measures to overcome barriers to communication:

• The entire problem to be communicated should be studied in-depth, analysed, and stated in such a manner that is clearly conveyed to subordinates.
• Communication must be according to the education and understanding levels of subordinates.
• Before communicating the message, it is better to consult with subordinates.
• The contents of the message, tone, language used, etc. are important aspects of effective communication.
• While conveying a message to others, it is better to know the interests and needs of the receiver.
• Ensure proper feedback.

Question 19.
Describe the features of a good brand name.
Answer:
Qualities of a Good Brand Name:

• The brand name should be short, easy to pronounce, spell, recognise and remember.
• A brand should suggest the product’s benefits and qualities.
• A brand name should be distinctive.
• Brand name should be adaptable to packing or labelling requirements, to different advertising media and to different languages.
• The brand name should be sufficiently versatile to accommodate new products.
• It should be capable of being registered and protected legally.

Question 20.
Consumer grievances are redressed by the three tier machinery under the Consumer Protection Act. Name these three agencies and their jurisdiction limit.
Answer:
1) District Forum: This is established in each district by the state government. The District Forum consists of a president and two other members. A complaint can be made to the appropriate District Forum when the value of the goods or services and compensation claimed does not exceed Rs. 20 lakh. In case the aggrieved party is not satisfied with the order of the District Forum, he can appeal before the State Commission within 30 days of the passing of the order.

2) State Commission: It is established by the state government. The State Commission consists of a president and not less than two other members. A complaint can be filed before the State Commission where the value of goods or services and the compensation claimed exceeds Rs. 20 lakh but does not exceed Rs. 1 crore.ln case the aggrieved party is not satisfied with the order of the State Commission he can appeal to the National Commission within 30 days of passing of the order.

3) National Commission: The National commission was constituted by the central government. The National Commission consists of a president and at least four other members. It is the apex body in the three-tier judicial machinery set up by the government for redressal of consumer grievances. All complaints pertaining to those goods dr services and compensation whose value is more than RS. 1 crore can be filed directly before the National Commission. An appeal can be filed against the order of the National Commission to the Supreme Court within 30 days from the date of order passed.

Answer any 4 questions from 21 to 25. Each carries 4 scores. (4 × 4 = 16)

Question 21.
Write one example of the following plans:
a) Rule
b) Policy
c) Programme
d) Objective
Answer:
a) Rule – No smoking
b) Policy – Promotion is based on merit only
c) Programme – Three day training programme to mangers
d) Objects – Attain Rs. 20,00,000 profit

Question 22.
It is important for a business enterprise to understand its environment. Why?
Answer:
Importance of Business Environment:

1. Identification of opportunities: Environment provides numerous opportunities for business success. Early identification of opportunities helps an enterprise to be the first to exploit them.
2. Identification of threats: Environmental awareness help managers to identify various threats on time and serves as an early warning signal.
3. Tapping useful resources: Business environment helps to know the availability of resources and making them available on time.
4. Coping with rapid changes: Environmental scanning enables the firms to adapt themselves to the changes in the market.

Question 23.
Explain the limitations of controlling.
Answer:
Limitations of Controlling:

• Difficulty in setting quantitative standards: Control system loses some of its effectiveness when standards cannot be defined in quantitative terms.
• Little control on external factors: Generally an enterprise cannot control external factors such as government policies, technological changes, competition, etc.
• Resistance from employees: Control is often resisted by employees. They see it as a restriction on their freedom.
• Costly affair: Control is a costly affair as it involves a lot of expenditure, time and effort.

Question 24.
“Advertising misleads customers and increase the cost of product.”
a) Do you agree with this statement?
b) Give reason
Answer:
a) Yes, I agree with this statement
b) Disadvantages of Advertising

• Advertisement encourages consumers to buy unwanted goods.
• Most of the advertisements are misleading.
• Advertisement may lead to monopoly of a brand.
• Advertisement is a costly affair. So, ultimately it increases the price of the product.

(OR)

a) No. I diagree with this statement
b) Advantages of Advertising

• Advertising helps in introducing hew products.
• It stimulates the consumers to purchase the new products.
• It helps the consumers to know about the various products and their prices.
• Consumers can purchase the better products easily.
• Advertisement helps to create more employment opportunities.
• It provides an important source of income to the press, radio, T.V., etc.

Question 25.
“Entrepreneurship and Management are same.” Comment your views.
Answer:
a) Entreprenuership and management are different

b) Difference between Entreprenurship and Management
Entrepreneurship:

1. The main motive of an entrepreneur is to start a venture by setting up an enterprise.
2. An entrepreneur is the owner of the enterprise.
3. An entrepreneur assumes all risks and uncertainty.
4. An entrepreneur gets profit.

Management:

1. The main motive of a manager is to render his services in an enterprise already set up by someone.
2. A manager is the servant in the enterprise.
3. A manager does not bear any risk involved in the enterprise.
4. A manager gets salary.

Answer any 3 questions from 26 to 29. Each carries 5 scores. (3 × 5 = 15)

Question 26.
Metro Ltd. engaged in the production of soap and it has purchase, production, marketing and finance departments.
a) Suggest a suitable organisation structure.
b) State any two merits and demerits of this organisation structure.
Answer:
a) Functional Organisation Structure
b) Advantages

1. It promotes division of work which leads to specialisation.
2. It promotes control and coordination within a department.

Disadvantages:

1. Each departmental head gives more importance to their departmental objectives than overall organisation objectives.
2. In large functional organisations, taking quick decisions and co-ordination become difficult.

Question 27.
“It is the market for short terror funds which deals in financial assets whose period of maturity is upto one year.”
a) Identify the type of market referred above. (1)
b) Briefly explain the various instruments used in this market. (4)
Answer:
a) Money Market
b) 1) commercIal Paper: Commercial paper is a short-term unsecured promissory note, negotiable and transferable by endorsement and delivery with a maturity period of 15 days to one year. It is sold at a discount and redeemed at par.

2) Call Money: Call money is short term finance repayable on demand, with a maturity period of one day to fifteen days, used for inter-bank transactions.

3) Certificate of Deposit: Certificates of Deposit (CDs) are short-term instruments issued by Commercial Banks and Special Financial Institutions (SFIs), which are freely transferable from one party to another. The maturity period of CDs ranges from 91 days to one year.

4) Commercial Bill: A commercial bill is a Bill of Exchange used to finance the working capital requirements of business firms. When goods are sold in credit, the seller draws the bill and the buyer accepts it. The seller can discount the bill before its maturity with the bank. When a trade bill is accepted by a commercial bank it is known as commercial bills.

Question 28.
Hantex offers 30% discount for all their products during Onam season as a part of their promotion technique.
a) Identify the promotion technique used by them.
b) Explain any 2 merits and demerits of this technique.
Answer:
a) Sales Promotion
b) Merits of Sales Promotion

1. Sales promotion activities attract attention of the people.
2. Sales promotion tools can be very effective at the time of introduction of a new product in the market.

Limitation of Sales Promotion:

1. If a firm frequently relys on sales promotion, it creates doubts in the minds of consumers about the quality of the product.
2. Use of sales promotion tools may affect the image of a product.

Question 29.
Explain the functional foremanship technique with a diagram.
Answer:
1. Functional foremanship: Functional foremanship is a technique in which planning and execution are separated. He classified 8 specialist foremen into two departments viz. Planning and Production department. Both departments have four foremen each. Functional foremanship is based on the principle of division of work.

Planning Department:

1. Route Clerk Gang Boss
2. Instruction Card Clerk Speed Boss
3. Time and Cost Clerk Repair Boss
4. Shop Disciplinarian Inspector

Production Department:

1. Gang Boss
2. Speed Boss
3. Repair Boss
4. Inspector

a. Route clerk: To lay down the sequence of operations through which the raw materials have to pass in the production process.
b. Time & cost clerk: To lay down the standard time for completion of the work.
c. Instruction card clerk: He is expected to deal with the instructions to be followed by workers in handling the job.
d. Disciplinarian: He maintains proper discipline in the factory.
e. Gang boss: He arranges material, machine, tool, etc. for operation.
f. Speed boss: He supervises matters relating to the speed of work.
g. Repair boss: He ensures repairs and maintenance of the tools and machines.
h. Inspector: He checks the quality of work done.

Answer any 2 questions from 30 to 32. Each carries 8 scores. (2 × 8 = 16)

Question 30.
It is the process of identifying and choosing the best person out of a number of prospective candidates for a job.
a) Name the process
b) Explain its steps
Answer:
a) Selection
b) Process of Selection
1. Preliminary Screening: Preliminary screening helps the manager to eliminate unqualified job seekers.

2. Selection Tests: Various tests are conducted to know the level of ability, knowledge, interest, aptitude, etc. of a particular candidate. The various types of tests are:

• Intelligence Tests
• Aptitude Test
• Personality Tests
• Trade Test
• Interest Tests

3. Employment Interview: Interview is a formal, in-depth conversation conducted to evaluate the applicant’s suitability for the job.

4. Reference and Background Checks: Many employers request names, addresses, and telephone numbers of references for the purpose of verifying information and; gaining additional information on an applicant.

5. Final Selection: The final decision has to be made from among the candidates who pass the tests, interviews and reference checks.

6. Medical Examination: After selection, the candidates are required to appear for a medical examination for ensuring that he is physically fit for the job.

7. Job Offer: After a candidate has cleared all the hurdles in the selection procedure, he is formally appointed through an order. It contains the terms and conditions of the employment, pay scale, joining time, etc.

8. Employment Contract: Basic information that should be included in a written contract of employment are job title, duties, responsibilities, date of joining, pay and allowances, hours of work, leave rules, disciplinary procedure, work rules, termination of employment, etc.

Question 31.
Explain briefly the elements of the directing function.
Answer:
Elements of Direction:

1. Supervision
2. Motivation
3. Leadership
4. Communication

1) Supervision: Supervision means overseeing the subordinates at work. Supervision is instructing, guiding and controlling the workforce with a view to see that they are working according to plans, policies, programmes and instructions.

Importance of Supervision:

• A good supervisor acts as a guide, friend and philosopher to the workers.
• Supervisor acts as a link between workers and management. It helps to avoid misunderstandings and conflicts between management and workers.
• Supervisor provides good On the Job training to the workers and employees.

2) Motivation: Motivation is the process of stimulating people to action to accomplish desired goals. Motivation depends upon satisfying needs of people.
Features of Motivation:

• Motivation is an internal feeling.
• Motivation produces goal-directed behaviour.
• Motivation can be either positive or negative.

3) Leadership: Leadership can be defined as the process of influencing the behaviour of employees at work towards the accomplishment of organisational objectives.
Features of Leadership:

• Leadership indicates ability of an individual to influence others.
• Leadership tries to bring change in the behaviour of others.
• Leadership indicates interpersonal relations between leaders and followers.

4) Communication: Communication may be defined as an exchange of facts, ideas, opinions or emotions between two or more persons to create mutual understanding.
Importance of Communication:

• Acts as basis of co-ordination: Communication acts as the basis of co-ordination.
• Helps in smooth working of an enterprise: It is only communication which makes smooth working of an enterprise possible.
• Acts as basis of decision making Communication provides needed information for decision making.

Question 32.
Describe the factors that affect the capital structure of a company.
Answer:
Capital Structure: Capital structure refers to the mix between owners, funds and borrowed funds. Owners, fund consists of equity share capital, preference share capital and reserves and surpluses or retained earnings. Borrowed funds can be in the form of loans, debentures, public deposits, etc.

A capital structure will be said to be optimal when the proportion of debt and equity is such that it results in an increase in the value of the equity share.

Factors Affecting Capital Structure:

• Trading on Equity (Financial Leverage): It refers to the use of fixed income securities such as debentures and preference capital in the capital structure so as to increase the return of equity shareholders.
• Stability of Earnings: If the company is earning regular and reasonable income, the management can rely on preference shares or debentures. Otherwise issue of equity shares is recommended.
• Cost of Debt: A firm’s ability to borrow at lower rate, increases its capacity to employ higher debt.
• Interest Coverage Ratio (ICR): The interest coverage ratio refers to the number of times earnings before interest and taxes of a Company covers the interest obligation. Higher the ratio, better is the position of the firm to raise debt.
• Desire for control: If the management has a desire to control the business, it will prefer preference shares and debentures in capital structure because they have no voting rights.
• Flexibility: Capital structure should be capable of being adjusted according to the needs of changing conditions.
• Capital Market Conditions: In depression, debentures are considered good. In a booming situation, issue of shares will be more preferable.
• Period of Finance: If funds are required for short period, borrowing from bank should be preferred. If funds are require for longer period company can issue shares and debentures.

Kerala State Board New Syllabus Plus Two Business Studies Previous Year Question Papers and Answers.

Kerala Plus Two Business Studies Previous Year Question Paper March 2019 with Answers

Board	SCERT
Class	Plus Two
Subject	Business Studies
Category	Plus Two Previous Year Question Papers

Time : 2 1/2 Hours
Cool off time : 15 Minutes
Maximum : 80 Score

General Instructions to Candidates:

• There is a ‘cool off time’ of 15 minutes in addition to the writing time of 2 hrs.
• You are not allowed to write your answers nor to discuss anything with others during the ‘cool off time’.
• Use the ‘cool off time’ to get familiar with the questions and to plan your answers.
• Read questions carefully before you answering.
• All questions are compulsory and only internal choice is allowed.
• When you select a question, all the sub-questions must be answered from the same question itself.
• Calculations, figures and graphs should be shown in the answer sheet itself.
• Malayalam version of the questions is also provided.
• Give equations wherever necessary.
• Electronic devices except non-programmable calculators are not allowed in the Examination Hall.

Answer all questions from 1 to 7. Each carries 1 score. (7 × 1 = 7)

Question 1.
Identify the management principle which states that a manager should repalce “I with We” in all his conversations with workers to foster team spirit.
a) Espirit De Corps
b) Initiate
c) Unity of Command
d) Unity of Direction
Answer:
a) Espirit De Corps

Question 2.
Identify the type of plan which specifies the steps to be carried out in different business activities in a sequential order.
a) Programme
b) Procedure
c) Method
d) Strategy
Answer:
a) Programme

Question 3.
Which among the following is not an organizational objectives of management?
a) Profit
b) Survival
c) Protecting Environment
d) Growth
Answer:
c) Protecting Environment

Question 4.
Grapevine relates to ……..
a) Formal communication
b) Informal communication
c) Formal organisation
d) Informal organisation
Answer:
b) Informal communication

Question 5.
Name the controlling technique which states that only the significant deviations which go beyond the permissible limit should be brought to the notice of management.
Answer:
Management by exception/Control by exception

Question 6.
A company offers 40% of extra shaving cream in a pack of 100 grams. Identify the sales promotion tool used here.
Answer:
Quantity gift

Question 7.
A company gets applications without declaring any vacancies. However, as and when vacancy arises, the company makes use of such applications. Name the source of recruitment mentioned here.
Answer:
Casual callers/Un Solicited applicants

Answer questions 8 and 9 after observing given hint. Each carries 1 score. (2 × 1 = 2)

Question 8.
Hint:- Delegation Transfer of Authority from superior to subordinate.
Decentralisation:- …………
Answer:
Decentralisation refers to systematic delegation of authority throughout all levels of management in an organisation.

Question 9.
Hint:- Long term investment decision:- Capital budgeting decision.
Short term investment decision:-
Answer:
Working Capital Decision

Answer all questions from 10 to 13. Each carries 2 scores. (4 × 2 = 8)

Question 10.
Briefly explain the meaning of financial planning.
Answer:
It ensures adequate funds from various sources.

Question 11.
Classify the following items into appropriate elements business environment:
a) Literacy rate
b) Public debt (Internal and External)
c) Rate of saving and investment
d) Birth and death rate
Answer:
a) Social environment
b) Economic environment
c) Economic environment
d) Social environment

Question 12.
State any two characteristics of a good brand name.
Answer:

1. The brand name should be short
2. A brand name should be distinctive

Question 13.
State the conditions under which a consumer can approach the State Commission forgetting relief for his grievances.
Answer:
It is established by the state government. The state Commission consists of a president and not less than two other members. A complaint can be field before the State Commission where the value of goods service and the compensation claimed exceeds Rs. 20 lakh but does not exceed Rs. 1 crore. In case the aggrieved party is not satisfied with the order of the State Commission he can appeal to the National Commission within 30 days of passing of the order.

Answer any 4 questions from 14 to 18. Each carries 3 scores. (4 × 3 = 12)

Question 14.
State any three significance of Principles of Management.
Answer:

1. Increase efficiency: The understanding of the management principles provides guidelines to the managers for handling effectively the complex problems.
2. Optimum utilization of resources: The principles of management helps in the optimum utilization of resources through division of work, delegation of authority, etc.
3. Scientific decision: Management principles help in thoughtful decision-making. Such decisions are free from bias and prejudices.

Question 15.
Briefly explain the different types of leadership styles.
Answer:
Leadership Styles:

1. Autocratic or Authoritarian Leader: An autocratic leader gives orders and expects his subordinates to obey those orders. Here communication is only one-way with the subordinate.
2. Democratic or Participative Leader: A democratic leader encourages subordinates to participate in decision-making. They respect the other’s opinion and support subordinates to perform their duties.
3. Laissez Faire or Free-rein Leader: Here the followers are given a high degree of independence to formulate their own objectives and ways to achieve them.

Question 16.
Compare Treasury Bill and Commercial Paper, both are used in Indian money market.
Answer:
Difference between Treasury Bills and Commercial papers:
Treasury Bills:

1. It is issued by RBI on behalf of the central Government
2. It is issued in the form of sequred promissiory notes.
3. Risk free money.

Commercial papers:

1. It is issued by Joint Stock Company.
2. It is issued in the form of unsecured promissery notes.
3. It is risky market instrument.

Question 17.
State any three responsibilities of consumers.
Answer:
Consumers’ Responsibilities:

1. Be aware about various goods and services available in the market.
2. Buy only standardised goods as they provide quality assurance.
3. Learn about the risks associated with products and services, follow manufacturer’s instructions and use the products safely.
4. Read labels carefully so as to have information about prices, net weight, manufacturing and expiry dates, etc.
5. Choose only from legal goods and services.
6. Ask for a cash memo on purchase of goods or services.

Question 18.
Explain any three impact of government policy changes on business and industry.
Answer:

1. Competition for Indian firms has increased.
2. The customer’s wider choice in purchasing better quality of goods and services.
3. Rapid technological advancement has changed/ improved the production process.
4. Enterprises are forced to continuously modify their operations.
5. Need for Developing Human Resources arise.
6. There is a shift from production oriented concept to market oriented concept.

Answer any 5 questions from 19 to 24. Each carries 4 scores. (5 × 4 = 20)

Question 19.
Explain the following types of training:
a) Vestibule training
b) Apprenticeship training
Answer:
a) Vestibule Training: This is an off the job training method. Actual work environments are created in a class room and employees use the same materials, files and equipments. This is ususally done when employees are required to handle sophisticated machinery and equipment.

b) Apprenticeship Training: Apprenticeship training is an on the job training method. Here trainee is put under the guidance of a master worker. These are designed to acquire a higher level of skills. The trainees spend a prescribed time with an experienced trainer.

Question 20.
This management function ensures that “all activities are performed as per predetermind plans”.
a) Identify the management function.
b) Explain its first three steps.
Answer:
a) Controlling

b) Steps in control process:

1. Setting Performance Standards: Standards are the criteria against which actual performance would be measured. Standards can be set in both quantitative as well as qualitative terms.
2. Measurement of Actual Performance: After establishing standards, the next step is measurement of actual performance. Performance should be measured in an objective and reliable manner.
3. Comparing Actual Performance with Standards: This step involves comparison of actual performance with the standard. Such comparison will reveal the deviation between actual and desired results.

Question 21.
Briefly explain any two characteristics of entreprenurship.
Answer:
Characteristics of entrepreneurship:

1. It is a systematic and purposeful activity.
2. The object of entrepreneurship is lawful business.
3. Entrepreneurship is a creative and innovative response to the environment and an ability to recognize, initiate and exploit an economic opportunity.
4. It is concerned with employing, managing, and developing the factors of production.

Question 22.
Under this technique of scientific management, one worker is supervised by eight specialist foreman.
a) Identify the technique.
b) Show this technique in a diagram.
Answer:
a) Functional foremanship

b)

Question 23.
State any four regulatory functions of SEBI.
Answer:
Regulatory Functions:

1. Registration of brokers and sub brokers and other players in the market.
2. Registration of Mutual Funds.
3. Regulation of stock brokers, portfolio exchanges, underwriters, etc.
4. Regulation of takeover bids by companies.

Question 24.
State any four differences between marketing and selling.
Answer:
Marketing:

1. Marketing is a wider term consisting of number of activities.
2. It is concerned with product planning arid development.
3. It focuses on maximum satisfaction of the customer.
4. It aims at profits through consumer satisfaction.

Selling:

1. It is a narrow concept.
2. It is concerned with sale of goods already produced.
3. It focuses on the maximum satisfaction of the sellers through the exchange of products.
4. It aims at maximum profit through maximisation of sales.

Answer any 3 questions from 25 to 28. Each carries 5 scores. (3 × 5 = 15)

Question 25.
Mr. Jojo is working as a production manager of a Joint Stock Company.
a) Identify the level of management he belongs to.
b) State any four functions performed by him.
Answer:
a) Middle level

b) Functions of Middle Level Management:

1. Carry out the plans formulated by the top managers.
2. To act as a link between Top Level Management and Lower Level Management.
3. Assign necessary duties and responsibilities to the subordinates.
4. Motivate them to achieve desired objectives.

Question 26.
This management function seeks to bridge the gap between where we are and where we want to go.
a) Identify the management function.
b) Explain any four importance of that function.
Answer:
a) Planning

b) Importance of Planning:

1. Planning provides directions: By stating in advance how work is to be done planning provides direction for all actions.
2. Planning reduces the risk of uncertainty: Planning enables an organisation to predict future events and prepare to face the unexpected events.
3. Planning reduces wasteful activities: Planning serves as the basis of coordinating the activities and efforts of different departments and individuals. It helps to eliminate useless and redundant activities.
4. Planning promotes innovative ideas: Since planning is thinking in advance, there is scope for finding better and different methods to achieve the desired objectives.

Question 27.
This management function begins with work force planning and putting people to job.
a) Name the management function.
b) Explain its first four steps/process
Answer:
a) Staffing

b) Staffing Process:

1. Manpower planning: it is concerned with forecasting the future manpower needs of the organisation, i.e., finding out number and type of employees need by the organisation in future.
2. Recruitment: Recruitment may be defined as the process of searching for prospective employees and stimulating them to apply for jobs in the organisation.
3. Selection: Selection is the process of selecting the most suitable candidates from a large number of applicants.
4. Placement and Orientation: Placement refers to putting the right person on the right job. Orientation is introducing the selected employee to other employees and familiarising him with the rules and policies of the organisation.

Question 28.
Star Ltd. produces three types of products such as cosmetics, garments and medicines.
a) Suggest a suitable organizational structure for Star Ltd.
b) Represent this structure in a diagram.
c) State any two advantages of it.
Answer:
a) Divisional Organisation Structure

b)

c) Advantages

• Each division functions as an autonomous unit which leads to faster decision making.
• It helps in fixation of responsibility in cases of poor performance of the division.

Answer any 2 questions from 29 to 31. Each carries 8 scores. (2 × 8 = 16)

Question 29.
One of the financial decision relates to the amount of profits to be retained in the business.
a) Identify the financial decision.
b) Explain any seven factors affecting this decision.
Answer:
a) Dividend decision

b) Factors affecting Dividend Decision:

• Stability Earnings: A company having stable earnings can declare higher dividends. Otherwise, pay lower dividend.
• Stability of Dividends: Companies generally follow a policy of stabilising dividend per share. Dividend per share is not altered if the change in earnings is small.
• Growth Opportunities: Companies having good growth opportunities retain more money out of their earnings to finance the required investment. In such a case, they can declare dividend at a lower rate.
• Cash Flow Positions: Availability of enough cash in the company is necessary for declaration of dividend.
• Shareholders’ Preference: While declaring dividends, managements must keep in mind the preferences of the shareholders in this regard.
• Taxation Policy: A company is required to pay tax on dividend declared by it. If tax on dividend is higher, company will prefer to pay less by way of dividends whereas if tax rates are lower, then more dividends can be declared by the company.
• Capital Market: Reputed companies have easy access to the capital market and, therefore, they can pay higher dividends than the smaller companies.

Question 30.
Sun Ltd. offers shares to its employees at a price which is lower than market price.
a) Identify the type incentive offered to the employees.
b) Name the incentive.
c) Explain any four similar types of incentives,
Answer:
a) Financial Incentive/Monetary Incentive
b) Employees stock Option Plan (ESOP)
c)

1. Pay and allowances: It includes basic pay, dearness allowances and other allowances.
2. Commission: Under this system, a sales person is guaranteed a minimum wage as well as commission on sales. A commission plan motivates him to work better.
3. Bonus: Bonus is an incentive offered over and above the wages/salary to the employees.
4. Profit Sharing: Profit sharing is meant to provide a share to employees in the profits of the organization.

Question 31.
It is an impersonal form of communication which is paid for by the marketers (sponsors) to promote some goods and services.
a) Name the promotional tool mentioned above.
b) Explain its four merits and three limitations.
Answer:
a) Advertisement

b) Merits of Advertising
Advantages to Manufacturers and Traders:

• Advertising helps in introducing new products.
• It stimulates the consumers to purchase the new products.
• Advertisement helps to increase the sales of new and existing products.

Advantages to Consumers:

• It helps the consumers to know about the various products and their prices.
• Consumers can purchase the better products easily.
• It helps in maintaining high standard of living.

Advantages to the Society:

• Advertisement helps to create more employment opportunities.
• It provides an important source of income to the press, radio, T.V., etc.
• It is a source of encouragement to artists.

c) Disadvantages/Objections to Advertising:

• Advertisement encourages consumers to buy unwanted goods.
• Most of the advertisements are misleading.
• Advertisement may lead to monopoly of a brand.
• Advertisement is a costly affair. So, ultimately it increases the price of the product.

Kerala State Board New Syllabus Plus Two Economics Previous Year Question Papers and Answers.

Kerala Plus Two Economics Previous Year Question Paper Say 2018 with Answers

Board	SCERT
Class	Plus Two
Subject	Economics
Category	Plus Two Previous Year Question Papers

Time: 2½ Hours
Cool off time : 15 Minutes

General Instructions to candidates

• There is a ‘cool off time’ of 15 minutes in addition to the writing time of 2½ hrs.
• Your are not allowed to write your answers nor to discuss anything with others during the ‘cool off time’.
• Use the ‘cool off time’ to get familiar with the questions and to plan your answers.
• Read questions carefully before you answering.
• All questions are compulsory and only internal choice is allowed.
• When you select a question, all the sub-questions must be answered from the same question itself.
• Calculations, figures and graphs should be shown in the answer sheet itself.
• Malayalam version of the questions is also provided.
• Give equations wherever necessary.
• Electronic devices except non programmable calculators are not allowed in the Examination Hall.

Answer all questions from question No.1 to question No. 14 (Total Scores: 26)

Question 1.
The curve showing a set of all possible combinations of two factor inputs that give the same level of output is:
a) Indifference curve
b) Iso-quant
c) Budget Line
d) Rectangular Hyperbola
Answer:
b) Iso-quant

Question 2.
In the following diagrams which one is constant elasticity demand curve?

Answer:
Perfect inelastic demand curve

Question 3.
Identify the type of Economy/Economic System. Basic economic problems regarding allocation of resources are solved through Price Mechanism.
a) Centrally Planned Economy
b) Market Economy
c) Mixed Economy
d) None of the above
Answer:
b) Market Economy

Question 4.
The Great Depression of 1929 affected in the countries of Europe and North America. Which of the following is the outcome of the depression? (1)
a) Increase in GDP Growth rate
b) Increase in employment rate
c) Increase in unemployment rate
d) Increase in per capita income
Answer:
c) Increase in unemployment rate

Question 5.
Give Economic term for the following: (4 × 1 = 4)
a) Pictorial illustration of the interdependence between major sectors of the economy.
b) The total liability of the monetary authority of country.
c) Revenue Expenditure – Revenue Receipts
d) The record of the transactions in goods, services and assets between residents of a country with rest of the world for a specified time period.
Answer:
a) Circular flow of income
b) High powered money
c) Revenue deficit
d) Balance of payment (BoP)

Question 6.
Prepare a demand schedule if the demand function is D(P) = 20 – 2P, if the prices are 2, 4, 6, 8.
Answer:

Price	Quantity
2	16
4	12
6	8
8	4

DP = 20 – 2P
When p = 2, 4, 6, 8, etc……
P = 20 – 2 × 2 = 20 – 4 = 16
= 20 -2 × 4 = 20 – 8 =12
= 20 – 2 × 6 = 20 – 12 = 8
= 20 – 2 × 8 = 20 – 16 = 4

Question 7.
In a perfect competitive firm price must be greater than or equal to LRAC in the long-run. As per this condition verify there is any mistake in the following diagram. If so correct the diagram.

Answer:
Correct diagram showing
P = Minimum LRAC or P > Minimum LRAC

Question 8.
Complete the columns:

Changes in Demand & Supply	Nature of Changes in Equilibrium Price	Nature of Changes in Equilibrium Quantity
Supply remain the same. Demand increases
Demand and Supply increase in same proportion

Answer:

Changes in Demand & Supply	Nature of Changes in Equilibrium Price	Nature of Changes in Equilibrium Quantity
Supply remain the same. Demand increases	Equilibrium price increases	Equilibrium Quantity increases
Demand and Supply increase in same proportion	equilibrium price constant	Equilibrium Quantity increases

Question 9.
Classify the following statements into Micro and Macro Economics:
a) RBI announces a new monetary policy.
b) Ramu purchased banana from the market.
c) GDP growth rate declined.
d) Abnormal profit earn by a monopoly firm.
Answer:
Micro Economics:

• Ramu purchased banana from market
• Abnormal profit earn by a monopoly firm

Macro Economics:

• RBI announces a new monetary policy
• GDP growth rate declared

Question 10.
Consider the items given below. Identify the most likely market situation in which they are produced.
a) Oil Producing Industry
b) Indian Railway
Answer:
a) Oligopoly
b) Monopoly

Question 11.
Explain tax revenue and non-tax revenue sources of revenue receipts of the government budget.
Answer:
Tax Revenue:
The most important source of governments revenue is tax revenue.
Taxes are of two types.

1. Direct tax
2. Indirect tax.
   eg. Income tax, Corporate tax

Non Tax Revenue:
It is the recurring income earned by the government from sources other than taxes.
eg. Customs duty, Service tax

Question 12.
The excess of private investment over saving of a country is ₹ 5,000 crores. The amount of Budget deficit is ₹ 500 crores. What was the volume of Trade deficit of that country?
Answer:
Trade deficit = (M – X) = (I – S) + (G – T)
= 5000 + 500
= 5,500

Question 13.
From the following data
a) Derive the consumption function equation
b) Calculate Aggregate consumption
National Income – 1000 crores
Autonomous consumption – 200 crores
Marginal Propensity of consume – 0.70
Answer:
a) Consumption function equation C = \(\overline{\mathrm{C}}\) + c.y
b) Aggregate consumption = 200 + 0.7 × 1000
= 900

Question 14.
The following figures are based on Balance of Payment accounts:

	In ₹ crores
Import of goods	3, 000
Export of goods	5, 000
Shipping	100
Travel and Tourism	200

a) Write Balance of Trade Equation
b) Calculate Balance of Trade.
Answer:
a) Balance of trade equation = Export – Import
b) Balance of trade = 5000 – 3000 = 2,000

Write any 6 questions from question 15 to question 21. Each carry 3 scores. (6 × 3 = 18)

Question 15.

Production Possibilities	Food	Cloth
A	0	50
B	10	45
C	20	35
D	30	20
E	40	0

By using the production possibility set draw a production possibility frontier and mark the following points:
a) Fuller Utilisation of Resources
b) Under Utilisation of Resources
Answer:

Question 16.
Complete the table.

Increase in Input %	Increase in Output %	Return to Scale
10%	20%
10%	10%
10%	5%

Answer:

Increase in Input %	Increase in Output %	Return to Scale
10%	20%	Increasing returns to sale
10%	10%	Constant returns to sale
10%	5%	Decreasing returns to sale

Question 17.
Observe the following diagram

a) Define the liquidity trap and mark it on the diagram.
b) If r = r_max, what will be the speculative demand for money?
Answer:
a) Liquidity Trap: A situation in the economy may arise when everyone will hold their wealth in money balance. If additional money is injected into the economy, it will not be used to purchase bonds. It will be used to satisfy the people’s drawing for money balance without lowering the rate of interest. Such a situation is called ‘liquidity trap’. The liquidity trap is given in the diagram below.

b) O (M^d_s) = 0

Question 18.
If a shirt costs ₹ 500 in India and $10 in US. The rupee – dollar exchange rate should be ₹ 50 = $1.
Write the effects of the following changes.
(Hint: Increase or decrease)?

Changes in Exchange Rate and Price	Changes in Export of shirt from India to US
Exchange rate changes to ₹ 60 = $1
Price of shirt in India increased to ₹ 700
Exchange rate changes to ₹ 40 = $1

Answer:

Changes in Exchange Rate and Price	Changes in Export of shirt from India to US
Exchange rate changes to  ₹ 60 = $1	Increases
Price of shirt in India increased to  ₹ 700	Decreases
Exchange rate changes to  ₹ 40 = $1	Decreases

Question 19.
Complete the flow chart:

Answer:

Question 20.
The aggregate demand function is AD = 100 + 0.754
a) Calculate the equilibrium income.
b) If Autonomous expenditure increased to ₹ 150 from ₹ 100 calculate the change in equilibrium income.
Answer:
Question is incomplete

Question 21.
a) State the conditions of shutdown point of a firm under perfect competition in the short-run.
b) Represent that shut-down point in a diagram.
Answer:
a) P = Minimum point of AVC
b) The minimum point of AVC is known as shut down point in the short run.

Write any 4 questions (Q. No. 22 to 27). Each carry 5 marks: (4 × 5 = 20)

Question 22.
Short-run cost curves are ‘U’ shaped.
a) Do you agree with this? Give reasons.
b) Draw the SMC and SAC curves on a diagram.
c) Write any two relationship between SAC and SMC.
Answer:
a) Short run cost curves AVC, AC and MC are shaped because of that law of variable proportions.
It operates under the increasing returns due to various internal economics.
b)

c) When due to the operation of the law of increasing returns, SAC falls, SMC also falls.
If a firm operates under the law of diminishing returns, SAC increases, SMC also increases.

Question 23.

a) Find Price, MR and TC in the above table.
b) From the table, find equilibrium level of output at the profit maximisation conditions of perfect competition in the long-run.
c) Find level of profit at the equilibrium output.
Answer:
a)

b) MC = MR
MC non decreasing
equilibrium output is 6. Here TR = TC

c) Profit = TR – TC
= 60 – 60 = 0

Question 24.
Suppose the equilibrium price of Rubber in the market is ₹ 150/kg.
a) The government intervene in the market and fix a price ₹ 200/kg for Rubber, with a view to protect the rubber cultivators. Name the strategy.
b) What are the effects of that strategy?
c) Draw the diagram to illustrate this.
Answer:
a) Price floor/Support price
b) Excess supply
c) It may lead to lower prices for consumers.

In the diagram ep is market determined price. Since this price is very low this, may lead to loss to producers. So the government will intervene in the market and fix p₁ as floor price. This floor price will be higher than market determined price.

Question 25.
Receipts and Expenditure of central government are given below:
Revenue Receipts – 5,250 crores
Revenue Expenditure – 6,200 crores
Borrowing – 1,700 crores
Capital Receipts – 1,800 crores
Capital Expenditure – 850 crores
Calculate by using formula :
a) Gross Fiscal Deficit
b) Revenue Deficit
Answer:
a) Gross fiscal deficit = Net borrowing at home + Borrowing from RBI + Borrowing from abroad.
GFD = 1700
b) Revenue deficit = Revenue expenditure – Revenue receipt
= 6200 – 5250 = 950 crores

Question 26.
Bi-monthly review of RBI reduces the Bank rate from 7% to 6.5%.
a) What are the effects of the policy on money supply and aggregate demand?
b) If cdr = 1 rdr = 0.2 and Higfi powered Money = ₹ 2000 crores. Calculate the total money supply in the economy by using the formula.
Answer:
a) The effect of monetary policy on money supply increases and aggregate demand also increases.

Question 27.
The diagram shows Aggregate equilibrium in the economy:

Show diagrammatically the following changes in the Aggregate demand.
a) Autonomous expenditure (\(\overline{\mathrm{A}}\)) increases.
b) Marginal propensity to consume (C) increases
c) Identify the slope parametric shill and intercept parametric shift in the diagrams (a or b)
Answer:
a) Diagram showing parallel upward shift of aggregate demand (AD)
b) In diagram AD swings upwards
c) Points a & b not given in the diagram

Write any 2 questions (28 – 30). Each carry 8 marks: (2 × 8 = 16)

Question 28.
Compare the market conditions of monopoly and perfect competition by considering Number of Sellers, Nature of Product, Freedom of Entry, Demand Curve and Longrun Equilibrium with AC and MC.
Answer:
Perfect Competition:
There are large number of sellers in perfect competition and the commodity is sold at a uniform price. There is no competition and no rivalry among the firms.

Nature of Product:
The output sold under perfect competition will be homogeneous or identical. There will be no difference among the products. Another feature is that the sellers are price takers.

Freedom of Entry:
There is no restriction among firms entering and existing into the market.

Demand Curve:
Under perfect competition whatever be the level of output, price will remain constant. The price line under perfect competition is parallel to x-axis. This shows that under perfect competition, whatever be the level of output, each firm takes the price that is determined in the market. Since the price line is the demand curve, the demand curve is also a straight line parallel to the X-axis.The demand curve is shown below.

Long run equilibrium with AC and MC:
In the longrun all the costs are variable. When a firm to be in equilibrium the price should be more than or equal to the minimum point of LRAC curve.

Profit maximisation conditions are explain with the help of figure which is given below.

In the diagram 0q0 is the profit maximising level of output. Here all the three conditions of profit maximisation are met
1) P = MR = MC
2) MC curve is non-decrasing
3) Price (p) is more than or equal to minimum point of LRAC.

Monopoly:
Number of sellers: In monopoly market, there is only single seller for a product.
Nature of Product: There is no close substitute in the market. So monopoly firms charge higher price for goods and receive higher profit even in the long run.
Freedom of Entry: There is no freedom of enter into the market. Here firm acts as industry in monopoly market.
Demand Curve: In a monopoly market the firm and the industry are the same. So the firm demand curve and market demand curve would be the same. Demand curve of a monopoly firm will slope negatively which are given below.

AR curve of a monopoly firm is the same as its demand curve. It slopes downwards from left to right. This means, the monopolist firm can sell less quantity at high price and more quantity at lower price.

Long run equilibrium in monopoly:
Under monopoly finan attains equilibrium when two conditions are fulfilled. They are
i) Marginal revenue and marginal cost should be equal. (MR = MC)
ii) MC curve should cut MR curve from below.
Under monopoly since entry of other firms is prohibited. Firm will get the same level of profit in long run as in the short run.

In figure, q is the equilibrium quantity of output that gives maximum profit to the monopoly firm. MR and MC are equal at output q,m MC curve intersects MR curve at point E where MC curve should cut MR curve from below. Under monopoly since price and AR are same, AR at equilibrium quantity is the equilibrium price. Then AR at q is OP. This is the equilibrium price.

Question 29.
Some Macro economic aggregates are given below:

	(In Crores)
Intermediate consumption	150
Wage	350
Consumption Expenditure	400
Changes in Stock	350
Profit	200
Import	150
Export	250
Rent	300
Government Expenditure	200
Interest	150
Sales	800
Investment Expenditure	300

a) Identify the three methods to measuring National Income.
b) Calculate GDP from the above data by using any two methods.
Answer:
a) i) Product method
ii) Income method
iii) Expenditure method

b) Product method = P + In + R + W
= 200 + 150 + 300 + 350
= 1,000
Income method = Rent + Wages and salaries + Interest + Gross profits
= 300 + 350 + 150 + 200
= 1,000
Expenditure method = C + I + G + (X – M)
= 400 + 300 + 200 + (250 – 150)
= 1,000

Question 30.
a) Write the five degrees of elasticity and diagrammatically explain it.
b)

Find elasticity at the points A, B, C.
Answer:
The price elasticity of demand (ed) measures the degree of responsiveness of change in the price on quantity demanded. There are five degrees of elasticity of demand, which are (ep = 0)
i) Perfectly inelastic demand curve (epf = 0)

The demand curve is perpendicular to the x-axis. Even if the price increases or decreases demand will be the same, then demand is perfectly inelastic.

ii) Perfectly elastic demand curve (ep = 0c)

If a very small change in price leads to infinite change in demand. This is known as perfectly elastic demand. The demand curve will be parallel to x-axis.

iii) Unit elastic demand curve (ep = 1)

If a proportionate change in price leads to equal and proportionate change in demand, then demand is unit elastic demand.

iv) Elastic demand curve:

If a proportionate change in price leads to more than proportionate change in demand, it is in the case of elastic demand curve. Here price elasticity of demand is greater than I.

v) Inelastic demand curve

If a proportionate change in price leads to less than proportionate change in demand it is the case of inelastic demand. Here the price elasticity of demand is less than one.

b)

Kerala State Board New Syllabus Plus Two Economics Previous Year Question Papers and Answers.

Kerala Plus Two Economics Previous Year Question Paper March 2019 with Answers

Board	SCERT
Class	Plus Two
Subject	Economics
Category	Plus Two Previous Year Question Papers

Time: 2½ Hours
Cool off time : 15 Minutes

General Instructions to candidates

• There is a ‘cool off time’ of 15 minutes in addition to the writing time of 2½ hrs.
• Your are not allowed to write your answers nor to discuss anything with others during the ‘cool off time’.
• Use the ‘cool off time’ to get familiar with the questions and to plan your answers.
• Read questions carefully before you answering.
• All questions are compulsory and only internal choice is allowed.
• When you select a question, all the sub-questions must be answered from the same question itself.
• Calculations, figures and graphs should be shown in the answer sheet itself.
• Malayalam version of the questions is also provided.
• Give equations wherever necessary.
• Electronic devices except non programmable calculators are not allowed in the Examination Hall.

Match the column B & C with A: (5 × 1 = 5)

Question 1.

A	B	C
General theory of employment interest and money	CRR	Equilibrium Output
SLR	Effective demand	USA
AD = AS	1936	RBI
Public good	1929	J.M. Keynes
Great depression	Defence	Road

Answer:

A	B	C
General theory of employment interest and money	1936	J.M. Keynes
SLR	CRR	RBI
AD = AS	Effective demand	Equilibrium Output
Public good	Defence	Road
Great depression	1929	USA

Qn. No. 2 to 6, write the correct answer. Each question carries 1 score. (5 × 1 = 5)

Question 2.
write the economic term of \(\frac{\text { Change in output }}{\text { Change in input }}\)
Answer:
Marginal output / Marginal product.

Question 3.
Petroleum refining and marketing in India is the closest example of ………..
a) Monopoly
b) Oligopoly
c) Perfect Competition
d) None of these
Answer:
b) Oligopoly

Question 4.
In an open economy, if C = 0.7, m = 0.2. Calculate the value of multiplier.
Answer:
Multiplier = \(\frac{1}{\mathrm{MPS}+\mathrm{MPM}}\)
= \(\frac{1}{0.3+0.2}\) = \(\frac{1}{5}\)
= 2

Question 5.
In a centrally planned economy all major economic decisions are taken by ………..
a) Market
b) Government
C) Private Producers
d) None of these
Answer:
b) Government

Question 6.
When the existing price is higher than the equilibrium price ………..
a) Market demand is higher than market supply.
b) Market supply is higher than market demand.
c) Market demand is equal to market supply.
d) None of these.
Answer:
b) Market supply is higher than market demand.

Answer all questions from 7 – 11. Each carries 2 scores. (5 × 2 = 10)

Question 7.
The supply curve of a firm depends on many factors. Point out any two.
Answer:
The supply curve of a firm depends on different factors.
Two factors are:

1. Technological progress.
2. Input prices.

Question 8.
Differentiate between Balance of Payment (BoP) and Balance of Trade (BoT).
Answer:
Balance of trade is the difference between the visible export and visible import of a country with the rest of the world. It includes the exchange of goods only balance of payment is the complete record of the financial transaction made between a country and the rest of the world. The BOP includes visible and invisible transactions. The BOP account has 4 parts

1. Current account
2. Capital account
3. Official reserve account
4. Errors and omissions

Question 9.
a) Write down two most important characteristics of monopolistic competition.
b) Differentiate the price and output prevailing in the monopolistic competitive market with that of per-fectly competitive market.
Answer:
a) Two important characteristic of monopolistic competition are

1. Large number of buyers and sellers.
2. Product differentiation.

b) In monopolistic competition, price is greater than that under perfect competition. Just as output is differentiated product.
At the same time price is uniform price and output is homogeneous in perfect competition market.

Question 10.
Beginning on 15 August 2018, severe floods affected Kerala due to unusually high rainfall. The state gov-ernment has hiked the excise duty on liquor and by which, it is expected to raise revenue to ₹ 750 crore. Suppose the MPC (Marginal Propensity to Consume) of the same product is, only 0.8, then calculate the tax multiplier and its effect on income.
Answer:
Tax multiplier = \(\frac{\Delta Y}{\Delta T}=\frac{-C}{1-C}\)
= \(\frac{-0.8}{1-0.8}=\frac{-0.8}{0.2}\)
= – 4

Question 11.

a) Complete the given diagram.
b) Mark the real flow and money flow.
Answer:
a)

b) Money flow:

• Expenditure on goods and services
• Factor payment

Real flow:

• Goods and services
• Factor services

Answer any 6 questions from 12 – 18. Each carries 3 scores. (6 × 3 = 18)

Question 12.
In the open market, the price of rice/kg is ₹ 35. Assume that the poor people cannot afford to purchase rice at this price. To protect the poor people, the government decided to offer rice at a minimum price of ₹ 2/kg through ration shop. Identify the economic term of this situation. Draw a diagram to illustrate this.
Answer:
Price selling:

In the diagram, ‘ep’ is the market determined equilibrium price. If this price is very high then the government will interfere in the market and will fix ‘p’ as the price ceiling. This government fixed price ‘p’ is less than the market determined equilibrium price ‘ep’. This leads to the following situations.

• Rationing
• Black marketing
• Dual marketing
• Huge burden of government as subsidy.

Question 13.
Paul A. Samuelson used the concept Production Possibility Curve to explain the economic problem of a society. Draw the Production Possibility Curve on the basis of the given schedule.

Possibilities	Wheat (in lakh tonnes)	Machine (in thousands)
A	0	15
B	1	14
C	2	12
D	3	9
E	4	5
F	5	0

Answer:

Question 14.
Indian Rupee has been on a free fall since past few months. Rupee has lot more than 20% of its value this year when compared to last year. In this context, identify the important factors responsible for such a flexibility in the exchange rate.
Answer:
Factors responsible for flexibility in exchange rate are:

• Inflation rate
• High interest rate
• Government debt
• Recessionary situation
• Increasing oil prices
• Deficit in BOP

Question 15.
Prepare a short note on the concept of speculative demand for money with the help of a diagram.
Answer:
In order to make profits from the purchase and sale of bonds and securities individuals will hold cash. This is known as speculative demand for money. It can be drawn as follows:

There is a negative relationship between the market rate of interest and speculative demand for money. When the market rate of interest reaches r minimum the speculative demand curve will be parallel to ‘x’ axis. This situation is known as liquidity trap.

Question 16.
Suppose the price of tomato per kg. is ₹ 10, Ms. Mittu purchase 2 kg of tomato. If the price rises to ₹ 15, she buys 1 kg. Based on this information.
a) Draw the Demand Curve.
b) Find out the Elasticity of Demand.
Answer:
a)

b) Elasticity of demand:

Question 17.
Great depression was a severe worldwide economic depression that took place mostly during the 1930s, beginning in the United States. Prepare a brief note on it.
Answer:
The great depression of 1929 and the subsequent years created huge economic crisis in countries of Europe and North America. It affected other countries of the world as well. This depression proved that the classical idea of full employment and the automatic working of the economy was wrong. Due to depression production fell down.

Demand for goods in the market was low. Many factories were lying idel. Unemployment rose severely. The classical theory failed to explain the problem of long lasting unemployment in the economy. Keynes book was an attempt to explain this phenominon and remedial measures for it.

Question 18.
Define the concept of GDP deflator. Calculate the GDP deflator from the following data and analyse it.

• In 2015, the GDP at current price is ₹ 8,500.
• In 2015, the GDP at constant price is ₹ 7,000.

Answer:

It shows that the general price level has increased compared to the base year.

Answer any 6 questions from 19 – 23. Each carries 4 scores. (4 × 4 = 16)

Question 19.
Complete the following table:

Answer:

Question 20.
a) Distinguish between MPC and MPS.
b) Calculate the value of multiplier and income generated when there is an additional investment of ₹ 100 crore in an economy.

MPC	Value of multiplier	Income generated
0.2
0.5
0.8

Answer:
a) MPS + MPC = 1
∴ MPC = 1 – MPC
b)

If the values of MPC in an economy is unity the value of MPS will be zero. Thus, there is close relationship between MPC and MPS.

Question 21.
a) Define the monetary policy.
b) Reserve Bank of India controls the money supply in the country though its instruments. Analyse them.
Answer:
a) The policy adopted by RBI to regulate the fluctuations in the economy is known as monetary policy.

b) RBI contrails the money supply in the country through its monetary instruments which are given below.

1. Open market operations: It is the process of increasing or decreasing the volume of high powered money in the economy by purchasing or selling government bonds and securities.
2. Bank rate: It is the rate at which the central bank discounts first class bills of exchange of commercial banks or it is the interest rate charged by RBI on loans given to commercial banks.

3) Varying the reserve deposit ratios: Reserve deposit ratios are of two types:

1. CRR (Cash Reserve Ration): Commercial banks have to keep a certain percentage of their demand deposits and time deposits as reserves with RBI. This percentage is known as cash reserve ratio.
2. SLR (Statutory Liquidity Ratio): Commercial banks have to invest a certain percentage of their demand and time deposits on assets like gold or government securities. This percentage is known as SLR.

RBI in India acts as strong force in controlling credit by monetary policy. The acts of RBI towards control of money supply is also noteworthy.

Question 22.
QD = 500 – P
QS = 300 + P
a) Calculate the equilibrium price and quantity.
b) Draw a diagram based on equilibrium price and quantity.
Answer:
a) QD = 500 – P
QS = 300 + P
500 – P = 300 + P
500 – 300 = +P + P
200 = 2P
\(\frac{200}{2}\) = P
P = 100
Equilibrium price is 100
QD = 500 – P
= 500-100 = 400
Equilibrium quantity = 400

b)

Question 23.
Short run production function is different from long run production functions.
a) Identify any two important differences between the two.
b) Draw the Average Product and Marginal Product Curves. AP, MP
Answer:
a) 1) Under the short run the firm cannot vary all the inputs for a change in output in long run, but in long run firm can vary all inputs for a change in output.
2) Some inputs are fixed under short run while under long run there is no fixed input.

b)

Answer any 2 questions from 24 – 26. Each carries 5 scores. (2 × 5 = 10)

Question 24.
Statement I: Indian Railway (IR) is India’s National railway system operated by the Ministry of Railways.
Statement II: ONGC, ESSAR, Reliance Ltd., etc. are the oil extraction companies in the country.
a) Identify the closest market form associated with the above statements.
b) Point out the features of each market form.
c) List out two differences between these two mar¬ket forms.
Answer:
a) Statement I – associated with monopoly market.
Statement II – associated with oligopoly market

b) Features of monopoly market:

• Only a single seller.
• No close substitues are available.
• Barriers to entry.
• Firm itself is the industry.
• Firm is price maker.

Features of oligopoly market:

• Products may be homogeneous or differentiated.
• There exists selling cost.
• Freedom of entry and exit of firms.
• Interdependence of firms.

c) Difference between these market:
Monopoly:

1. Higher price
2. Single seller

Oligopoly:

1. Price less than monopoly market
2. Few sellers

Question 25.
a) Mention the methods of National Income accounting and explain briefly the expenditure method.
b) Caculate the GNP MP from the following data:

Item	Rupees (in crores)
NDPFC	10,000
Depreciation	2,000
Net Indirect Tax (NIT)	1,000
Net Factor Income from Abroad (NFIA)	5,000

Answer:
a) There are mainly three methods for measuring national income. They are product method, income method and expenditure method.
i) Product method: It is the sum of the gross value added by the entire production units in the economy.
GDP = \(\sum_{i=i}^{N} N V A_{i}+\sum_{i=i}^{N} D_{i}\)

ii) Income method: The income method approaches national income from the income side. National income is the sum total of the rewards earned by the factors of production in an economy in the form of rent, wage, interest and profit.
GDP = W + P + In + R

iii) Expenditure method: Expenditure method is an alternative way to calculate the GDP and it looks at the demand side of the production. The expenditure method estimates national income by measuring final expenditure on gross domestic product.
GDP = C + I + G + X – M

b) GNP_MP = 18000
= 5000 + 1000 + 2000 + 10000
= 18000

Question 26.

The above figure shows an equilibrium in the product market.
Suppose an Autonomous Investment (Al) increases by ₹ 100 crores, and MPC is equal to 0.8, what happens to the AD and equilibrium income? Explain this with the help of a diagram.
Answer:
Question is incomplete

Answer any 2 questions from 27 – 29. Each carries 8 scores. (2 × 8 = 16)

Question 27.
Ms. Sudha wants to consume apple and oranges. Her income is ₹ 400. The price of apple (Good 1) is ₹ 80/kg. and the price of orange is ₹ 50/kg. On the basis of this data.
a) Draw the budget line.
b) Write the equation of budget line.
c) How much kg of apple that Ms. Sudha can consume if she spend the whole income on that good alone?
d) What is the slope of the budget line?
e) Draw the new budget line in the same graph if her income falls to ₹ 200 remaining same the price of two goods.
f) What happens to the budget line if the price of apple rises to ₹ 100 but income and price of orange are remaining constant? Draw a new budget line.
Answer:
a)

b) P₁X₁ + P₂X₂ = M
80 X₁ + 50 X₂ = 400
c) \(\frac{400}{80}\)
d) Slope = \(\frac{-P_{1}}{P_{2}}=\frac{-80}{50}\)
e) Question is wrong.
f) Question is wrong.

Question 28.
In a perfectly competitive market, the firm wishes to maximize its profit.
a) Identify the conditions with the help of a diagram.
b) Explain the profit maximization of a firm in the short run.
c) In the long run, a perfectly competitive firm earns the normal profit. Do you agree with this? Graphically substantiate.
Answer:
a) The main air of a firm under perfect competition is the maximization of profit. The output level at which the firm maximises its profits is called equilibrium of the firm. The following conditions are necessary for the profit maximization. If firm

Condition – 1
Market price (P) should be equal to MC. ‘P’ should not be greater than MC or ‘P’ should not be less than MC.

If the market price (P) is less than MC then for producing each unit of output the firm incurs loss. When the firm produces output at q0 the gross profit is maximum. If q0 is equilibrium output then at q0 level of output market price (P) should be equal to MC.

Condition – 2
At the profit maximising level of output MC should not be decreasing or MC curve should cut MR curve from below.

Condition – 3
In the short run the price (P) should be more than or equal to minimum point of AVC.

Here the equilibrium output is q₁ and equilibrium price is p. If the price line is aboue the minimum point of AVC the loss will decrease. Thus in the short run the price of the firm should be more than or equal to minimum point of AVC.

b) Profit of a firm can be denoted as π. It is the difference between total revenue and total cost. Profit maximisation of firm in the short run takes place through following situations in the market which are given below.
1) P = MC
2) MC curve should cut the MR curve from below.
3) P > AVC.
In the short riff the firm should get at least minimum point of AVC as price, inorder to remain in the production process. So the minimum point of AVC is known as shut down point in the short run. In the short run the minimum point of SAC curve is the break even point.

c) Yes. I agree with this statement.
Each firm in the market will take the price determined in the market by the forces of demand and supply. If a firm changes a higher price than the market determined price then it will loose its entire customers. Since the firm gets only the normal profit he cannot sell below the market determined price.

Question 29.

SI NO.	Item	Amount (₹)
1.	Revenue Receipts	50,000
2.	Capital Receipts a) Borrowing and other liabilities (₹ 15,000) b) Non-debt creating capital receipts (₹ 15,000)	30,000
3.	Revenue Expenditure (including interest payments)	65,000
4.	Capital Expenditure	15,000
5.	Interest Payments	10,000

a) Write down the equation for calculating Revenue deficit, Fiscal deficit and Primary deficit.
b) Calculate Revenue deficit, Fiscal deficit and Primary deficit from the given data.
c) Suggest any two measures to reduce the Fiscal deficit in the country.
Answer:
Revenue deficit = Revenue expenditure – Revenue receipts
Fiscal deficit = Total expenditure – Total revenue excluding borrowing
OR
Fiscal deficit = Total expenditure – Revenue receipt + Capital receipts excluding borroiwng
Primary deficit = Fiscal deficit – Interest payments

b) Revenue deficit = 65000 – 50000 = 15000
Fiscal deficit = 90000 – 50000 – 15000
= 90000 – 65000 = 25000
Primary deficit = 25000 – 10000
= 15000

c) 1) Reduction in subsidies by the government will also help to reduce the deficit.
2) Borrowing from domestic sources

Kerala State Board New Syllabus Plus Two Economics Chapter Wise Previous Questions and Answers Part II Chapter 4 Income Determination.

Kerala Plus Two Macroeconomics Chapter Wise Previous Questions Chapter 4 Income Determination

Question 1.
Classify the following statements into two branches of economics: (MARCH-2008)
a) Firm’s decision about how much to invest.
b) Govt, has adopted devaluation to overcome deficit in balance of payments.
c) RBI has increased Cash Reserve Ratio to control inflation.
d) Price elasticity of luxury good is elastic
Answer:
a) Micro economics
b) Macroeconomics
c) Macroeconomics
d) Microeconomics

Question 2.
Assume the marginal propensity to consume of a State in India is 0.8 (MARCH-2010)
1) Find out tax multiplier and expenditure multiplier.
2) From the above example prove that adding these two policy multipliers brings a balanced budget multiplier.
Answer:

Question 3.
Suppose the income of individual A increases from ₹1,000 to ₹1,100. So his consumption rises from ₹750 to ₹825. Find out MPS and MPC. (MARCH-2010)
Answer:

Question 4.
a) Complete the following table: (JUNE-2010)
–
b) Using the equation prove that MPC + MPS = 1
Answer:
a)

b) MPC + MPS = 1
That is 0.75+ 0.25 = 1

Question 5.
The Central Government sanctioned ₹40 crores to Kerala and Assam for making additional investments. The MPC of Kerala is 0.8 and Assam is 0.5. (JUNE-2010)
a) Find the multiplier and multiplier effect on the income of these two States.
b) Explain the concept of output multiplier.
Answer:
a)


= 80 crores
b) Multiplier denotes the relationship between investment and income. Increase in investment leads to increase in income.

Question 6.
A = C + T = ₹ 50 crores, MPC = 0.8, Y = ₹ 4000 crores (MARCH-2011)
a) State whether the economy has reached in equilibrium or not (Hint: Y = \(\overline{\mathrm{A}}\) + CY)
b) Illustrate your conclusion in a diagram.
Answer:
Y = \(\overline{\mathrm{A}}\) + c. y
Since \(\overline{\mathrm{A}}\) = \(\overline{\mathrm{C}}\) \(\overline{\mathrm{I}}\). we have
Y = \(\overline{\mathrm{C}}\) \(\overline{\mathrm{I}}\) x c. y Putting values, we get
Y = 50 + 0.8 x 4000
=50 + 3200 – 3250
Since 3250 ≠ 4000, equilibrium is not reached in the economy.

Question 7.
Multiplier plays a significant role in Keynesian Macro Economics. (MARCH-2011)
a) Examine the relationship between multiplier and MPC
b) If MPC = 0.8, calculate multiplier.
Answer:
a) The value of multiplier is determined by marginal propensity to consume. Higher the MPC, greater the size of multiplier lower the MPC, smaller the size of multiplier. When income of consumer rises they spend more the value of increase in income ie. multiplier depends on’MPC, greater the value of multiplier depends on greater size of MPC. Thus there is direct relation between multiplier and MPC.
The relation can be expressed in terms of an equation as under

Putting the value of in equation we get,

Thus it is clear from the above equation that the value of MPC and multiplier are positively related
b) MPC = 0.8

Question 8.
Distinguish the terms ‘Ex ante investment’ and ‘Ex post’ investment. (MARCH-2012)
Answer:
Ex ante means ‘anticipated’ while Ex post means realised. In economics ex ante investment refers to anticipated investment in an economy while ex post investment refers to the realised investment.
Ex ante: The planned value of a variable as opposed to its actual value.
Ex post: The actual or realized value of a variable as opposed to its planned value .
Ex ante consumption: The value of planned consumption
Ex ante investment: The value of planned investment.

Question 9.
Explain the concept of aggregate demand with the help of a diagram.(MARCH-2013)
Answer:
The total amount of goods and services demanded in the economy at a given overall price level and in a given time period. It is represented by the aggregate-demand curve, which describes the relationship between price levels and the quantity of output that firms are willing to provide. Normally there is a negative relationship between aggregate demand and the price level. Also known as Total spending”.
Aggregate demand is the demand for the gross domestic product (GDP) of a country, and is represented by this formula:
Aggregate Demand (AD) = C + I + G + (X-M) Where, C = Consumers’ expenditures on goods and services.
I = Investment spending by companies on capital goods.
G = Government expenditures on publicly provided goods and services.
X = Exports of goods and services.
M = Imports of goods and services.
Downward sloping aggregate demand curve

The most noticeable feature of the aggregate demand curve is that it is downward sloping, as seen in . There are a number of reasons for this relationship. Recall that a downward sloping aggregate demand curve means that as the price level drops, the quantity of output demanded increases. Similarly, as the price level drops, the national income increases. There are three basic reasons for the downward sloping aggregate demand curve. These are Pigou’s wealth effect, Keynes’s interest-rate effect, and Mundell- Fleming’s exchange-rate effect. These three reasons for the downward sloping aggregate demand curve are distinct, yet they work together.
The first reason for the downward slope of the aggregate demand curve is Pigou’s wealth effect. The second reason for the downward slope of the aggregate demand curve is Keynes’s interest-rate effect. The third reason for the downward slope of the aggregate demand curve is Mundell-Fleming’s exchange-rate effect.

Question 10.
Distinguish the concepts (JUNE-2014)
a) Ex Ante and
b) Ex Post
Answer:
Ex-ante and Ex-post
Consumption, savings and investment can be classified into Ex-ante and Ex-post variables. The terms Ex-ante and Ex-post have been derived from the Latin word. Ex-ante means planned or desired. Ex-post means actual or realized. In national income accounting, the variables such as consumption, investment and savings are considered as ex-post variables. The rate at which consumption, savings and investment are presented in the ex-post sense.

Question 11.
Explain the concept marginal propensity to consume. How it relates to marginal propensity to save? (JUNE-2014)
Answer:
Marginal Propensity To Consume – MPC’
The proportion of an aggregate raise in pay that a consumer spends on the consumption of goods and services, as opposed to saving it. Marginal propensity
to consume is a component of Keynesian macroeconomic theory and is calculated as the change in consumption divided by the change in income. MPC is depicted by a consumption line- a sloped line created by plotting change in consumption on the vertical y axis and change in income on the horizontal x axis.
The marginal propensity to consume (MPC) is equal to AC / AY, where Ac is change in consumption, and AY is change in income.
Marginal Propensity to consume refers to the ratio of change in consumption to change in income. MPC = AC / AY
Marginal Propensity to save refers to the ratio of change in saving to change in income.
MPS = AS /AY
The sum of MPC and MPS is always one and equal to unity.
That is MPC + MPS = 1

Question 12.
The point on the supply curve at which a firm earns normal profit is called _________ (MARCH-2015)
a) Normal profit
b) Super normal profit
c) Break-even point
d) Shut-down point
Answer:
d) Shut-down point

Question 13.
In an economy, investment increases by 500 crores. If MPC is 0.5, what is the increase in total income? (MARCH-2015)
Answer:

Increase in total income
= Kx increase in investment
= 2 x 500 crores
= 1000 crores

Question 14.
If all the people of the economy increases the proportion of income they save, the aggregate savings in the economy will not increase. This phenomenon is known as ______. (MARCH-2015)
a) Paradox of prosperity
b) Paradox of thrift
c) Leontief paradox
d) Giffen paradox
Answer:
Paradox of thrift

Question 15.
Study the following table and answer the questions. (MARCH-2015)

a) Derive the aggregate demand schedule.
b) Show graphically the components of aggregate demand.
Answer:
a) Aggregate desired schedule

Question 16.
a) Explain Effective Demand. (MAY-2015)
b) What are the determinants of the value of aggregate demand?
c) Diagrammatically explain the change in Aggregate demand due to a change in government expenditure.
Answer:
Effective Demand
a) The logical starting point of Keynes General Theory is the principle of effective demand. Effective demand is the aggregate demand for the existing output at prevailing prices. The main reason for unemployment in an economy is the deficiency in aggregate demand. To avoid unemployment, we have to increase effective demand. Income and Employment determination The level of income and employment will be determined at the point where aggregate demand equals aggregate supply.
b) Aggregate demand and its determinants Aggregate demand is the total demand in an economy at various levels of employment. In other words it is aggregate expenditure on all goods and services in the economy. It consists of the four components.
They are:

• Consumption demand
• Investment demand
• Government demand

c) Equilibrium level of income is determined by Aggregate demand (AD) and Aggregate Supply (AS). This situation is shown in figure 1.

Figure 2 shows the effect of change in government expenditure. As government expenditure increases AD curve shifts up to AD¹.This brings new equilibrium point at E¹. So the level of income increases to Y¹.

Question 17.
Distinguish between the terms Ex-ante Investment and Ex-post Investment. (MAY-2016)
Answer:
Ex-ante investment means planned investment. On the other hand, ex-post investment means actual or realised investment.

Question 18.
Consider the following diagram. Answer the following questions: (MARCH-2017)

i) What does the 45° line represent?
ii) What is the difference between A₁ and A₁?
iii) List two possible reasons for an increase in Autonomous Expenditure.
iv) When the economy moved from E₁ to E₂, the Aggregate output is increased more as compared to Aggregate expenditure. Why?
v) Explain the movement of the economy from E₁ to E₂.
Answer:
i) Equilibrium income determination curve (AD curve)
ii) When investment increases the aggregate demand will increase. So equilibrium income will also increase.
iii) To increase public expenditure of govt.
To increase transfer of payment of govt.
iv) When govt, expenditure increases there occurs a change in autonomous component of the aggregate demand curve. The slope will remain constant then equilibrium income will increase. This is due to the operation of the multiplier.
Suppose the govt, expenditure increases, then aggregate demand curve shift from AD₁ to AD₂. So equilibrium income increase form E₁ to E₂. The change in income (∆y) is greater than change in govt, expenditure (∆G). This is due to the effect of multiplier.

Question 19.
Among the following choose the one which represents the multiplier.  (MARCH-2017)

Answer:

Question 20.
Elucidate the working of Autonomous Expenditure Multiplier Mechanism with a suitable example. Show the impact of a decline in MPC on multiplier.  (MARCH-2017)
Answer:
Consumption at zero level of income is called autonomous consumption. When there is increase in autonomous expenditure, the aggregate demand curve shifts upward. Similarly, when there is fall in autonomous expenditure the curve shifts downward.

Here mpc is the decisive factor influencing the value of multiplier. For example, if the value of mpc is 0.75, the multiplier is

Kerala State Board New Syllabus Plus Two Economics Chapter Wise Previous Questions and Answers Part II Chapter 3 Money and Banking.

Kerala Plus Two Macroeconomics Chapter Wise Previous Questions Chapter 3 Money and Banking

Question 1.
Complete the chart. (MARCH-2008)

Answer:

Question 2.
Imagine an economy without money and point out the difficulties faced in the exchange of commodities. Can you suggest an economic term for that situation? (MARCH-2008)
Answer:
a) Difficulties of commodity exchange system are:

• need of the double coincidence of wants.
• need of divisibility
• lack of common measure of value
• lack of proper store of value.

b) This system is called barter system.

Question 3.
In the following table some important monetary policy measures are given. Complete the table appropriately. (MARCH-2008)

Answer:

Question 4.
the questions given below. (MARCH-2008)
1) Central Government wants advice on a financial crisis.
2) Central Government wants an authority as the custodian of foreign exchange reserves.
3) The country needs an institution to regulate the money supply and credit system.
4) Commercial Banks wants an institution for assistance and advice.
a) Which institution can handle all these issues?
b) Analyse each issue and explain how that institution handle and make decision on them.
Answer:
a) RBI or Central Bank
b) 1) Financial adviser
2) Custodian of nation’s foreign exchange reserves
3) Control of credit
4) Lender of last resort

Question 5.
A recent study on film industry in Kerala reveals that even today majority of the producers depend not on banks but on big money lenders for raising the required capital. (JUNE-2009)
a) Comment on it in the background of Indian monetary system.
b) Suggest a remedy for betterment.
Answer:
a) It is a fact that in Kerala many people depend on private money lenders rather than banks. This is because banking activities are time-consuming and will cause unnecessary delay. Moneylenders are easily accessible and therefore people depend on them for financial requirements,
b) Banking system should be made easily approachable.

• Bank facilities should be provided to all.
• Delay in business should be avoided.
• Unnecessary formalities and practices should be avoided.
• Large security requirements of banks should be relaxed.

Question 6.
The RBI has been publishing four alternative measures of money supply in India since 1977. On the basis of this.(MARCH-2010)
a) Complete the following table:
b) Identify aggregate monetary resource.

Answer:

Question 7.
Data regarding the production and cost structure of a firm is given below: (MARCH-2010)

a) If TFC is 60, complete the table.
b) On the same set of axis plot TFC, TVC and TC.
c) Write relevant equations to find out AFC, AVC,
Answer:
a)

Question 8.
Monetary policy is the policy adopted by the RBI to stabilize the economy. One of the instruments of monetary policy is cash reserve ratio. Supplement other three and explain.(MARCH-2010)
Answer:
1) Bank Rate
2) Statutory Liquidity Ratio
3) Open Market Organisations

Question 9.
‘Money supply is a stock variable.’ (JUNE-2010)
a) Define the concept of money supply.
b) Name the four alternative measure of money supply.
c) Classify them into narrow money and broad money.
Answer:
Money supply consists of currency notes and coins issued by the monetary authority of the country.
b) The total stock of money in circulation among the public at a particular point of time is called money supply. RBI publishes figures for four alternative measures of money supply, viz. M₁, M₂, M₃ and M₄. They are defined as follows.
c) M₁ and M₂ are narrow money. M₃ and M₄ are broad money

Question 10.
RBI is the independent authority for conducting monetary policy in the economy. Explain the instruments which RBI uses for conducting monetary policy. (JUNE-2010)
Answer:
Bank rate
Open market operations
Margin requirements

Question 11.
Anand has an account in State Bank of India. He often withdraws some amount of money either through cheque or through ATM card. (MARCH-2011)
Answer:
Demand deposit/Saving deposit/Current deposit

Question 12.
In order to control inflation, Reserve Bank of India (RBI) raised Cash Reserve Ratio (CRR) by 0.75% during January 2010. As part of monetary policy, the RBI adopts some more measures to counter inflation. Discuss any other 2 measures. (MARCH-2011)
Answer:
The instruments which RBI uses for conducting mon-etary policy are as follows.
1) Open Market Operations:
It refers to the sale and purchase of government securities by the central bank. RBI purchases government securities to the general public in a bid to increase the stock of high powered money in the economy.
2) Bank Rate Policy:
As mentioned earlier, RBI can affect the reserve deposit ratio of commercial banks by adjusting the value of the bank rate-which is the rate of interest commercial banks have to pay RBI – if they borrow money from it in case of shortage of reserves. A low (or high) bank rate encourages banks to keep smaller (or greater) proportion of their deposits as reserves, since borrowing from RBI is now less (or more) costly than before.

Question 13.
Observe the graph given. Identify the segment of liquidity trap from the figure and choose the answer from bracket. (MARCH-2011)

Answer:
c to d

Question 14.
Distinguish between the ‘legal tender money’ and ‘flat money’.(MARCH-2012)
Answer:
Money issued by the monetary authority or the government which cannot be refused by any one is called legal tender money.
Eg : Currency notes.
On the other hand fiat money refers to money with no intrinsic value.
Eg : Coins

Question 15.
In India RBI has developed alternative measures of money supply and figures are published accordingly. (MARCH-2013)
a) Prepare a chart showing the alternative measures of money supply in India.
b) Categorise them into ‘narrow money’ and ‘broad money’.
c) Also identify the ‘most’ and ‘least’ liquid forms of money.
Answer:
The total stock of money in circulation among the public at a particular point of time is called money supply. RBI publishes figures for four alternative measures of money supply, viz. M₁, M₂, M₃ and M₄. They are defined as follows.

b) M₁ and M₂ are narrow money M₃ and M₄ are broad money
c) M₁ and M₂ are known as narrow money. M₃ and M₄ are known as tad money. These gradations are in decreasing order of liquidity. M₁ is most liquid and easiest for transactions whereas M₄ is least liquid of all. M₃ is the most commonly used measure of money supply. It is also known as aggregate monetary resources.

Question 16.
“People desire to hold money balance broadly from two motives.” Explain. (MAY-2015)
Answer:
The Transaction Motive: The principal motive for holding money is to carry out transactions. In general, the transaction demand for money in an economy, MdT, can be written in the following form
Mt = k.T
where T is the total value of (nominal) transactions in the economy over unit period and k is a positive fraction. The number of times a unit of money changes hands during the unit period is called the velocity of circulation of money. In general, equation can be modified in the following way
Mt = kPY
where Y is the real GDP and P is the general price level or the GDP deflator. The above equation tells us that transaction demand for money is positively related to the real income of an economy and also to its average price level.
The Speculative Motive : An individual may hold her wealth in the form of landed property, bullion, bonds, money, etc. Everyone in the economy will hold their wealth in money balance and if additional money is injected within the economy it will be used up to satiate people’s craving for money balances without increasing the demand for bonds and without further lowering the rate of interest below the floor level. Such situation is called a liquidity trap. The speculative money demand function is infinitely elastic here.

Question 17.
Distinguish between a stock and flow variables. Illustrate with examples. (MARCH-2017)
Answer:
Stock : It is a variable which can be measured at a particular point of time. Stock is a static concept e.g. wealth, money supply, inventory.
Flow: It is a variable which can be measured over a given period of time. It is a dynamic concept, e.g: income, gross value added (GVA), changes in inventory

Question 18.
Write a note on the interest responsiveness of the following motives for the demand for money. (MARCH-2017)
Answer:
i) Translation motive
ii) Precautionary motives
iii) Speculative motives
The amount of money that people keep as cash will be determined by comparing the advantages of liquidity and interest rates. The demand for money – as arises due to
1. Precautionary motive: People will hold liquid cash in order to meet emergencies. This is known as precautionary motive.
2. Transation motive: The desire of people hold cash in order to make transactions is defined as demand for money. The volume of GDP increases transations demand for money will also increase. It has a positive relationship with GDP.
3. Speculative motive: In order to make profits from the purchase and sale of bonds and securities individuals will hold cash. This is known as speculative motive.
The relationship between interest rate and bond price is negative. When the market rate of interest is high the bond price will be less.

When the market rate of interest reaches minimum the speculative demand curve will be parallel to ‘x’ axis. This situation is known as liquidity troop.

Question 19.
Match the following: (MARCH-2017)
M₁ : Most commonly used measure of money supply
M₂: Least liquid form of money supply
M₃: M₁ + Post Office Savings Deposits M
M₄: CU+DD
Answer:
M₁: CU + DD
M₂: M₁ + Post Office Savings Deposits
M₃: Most commonly used measure of money supply
M₄: Least liquid form of money supply.

Kerala State Board New Syllabus Plus Two Economics Chapter Wise Previous Questions and Answers Part II Chapter 2 National Income Accounting.

Kerala Plus Two Macroeconomics Chapter Wise Previous Questions Chapter 2 National Income Accounting

Question 1.
The national product can be measured by using the expenditure method, income method, and value-added method. Prepare the equations to find out GNP_MP with these separate methods. (MARCH-2008)
Answer:
National Income is the sum total of the value of goods and services produced in a country during a year. It can be measured using 3 methods namely product method, expenditure method, and income method.
Product Method
The process to obtain GNP_MP by the production method is: Value added in the primary sector + valued added in the secondary sector + value-added in the tertiary sector + Net factor income from abroad.
Income method
The process to obtain GNP_MP by the income method is: Compensation of employees + Profit + rent + interest + Mixed-Income + Depreciation + Net indirect taxes + Net factor income from abroad
Expenditure method
The process to obtain GNP_MP by the expenditure method is: Private consumption expenditure + Investment expenditure + Govt, purchase of goods and services + net exports + Net factor income from abroad.

Question 2.
Prepare self explanatory charts to explain the various concepts related to National Income concepts. (MARCH-2008)
a) GDP
b) PCI
c) NNP
d) PDI
Answer:
a) GDP – > GNP -> Net factor income from abroad
National Income
b) PCI – > \(\frac{\text { National Income }}{\text { Population }}\)
c) NNP – > GNP- depreciation
d) PDI -> Personal Income-direct taxes

Question 3.
Identify the Boxes and flows and complete the following. (MARCH-2009)

Answer:

Question 4.
The following table shows the different components of domestic factor income for the economy of Malasia. Complete the table by calculating the necessary figures. (MARCH-2009)

Answer:
Domestic Factor Income = Compensation of employees + Operating surplus + Mixed income of the self-employed.
1)250
2)450
3)-750
4) 1400

Question 5.
Give one word for the following statement: (MAY-2009)
a) National income + population
b) A pictural illustration of the interdependence between major sectors and their economic activities.
c) Personal income – direct tax.
d) GNP – Depreciation
Answer:
a) Per capita income
b) Circular flow
c) Disposable income
d) NNP

Question 6.
Suppose that in a two-sector economy the value of finished goods is equal to 200 crores and the income generated as factor reward is also equal to 200 crores. The household spends only 160 crores. Then (MAY-2009)
a) What will happen to circular flow?
b) Which system can be introduced to correct circular flow?
c) Name the leakages and injunctions.
d) Draw the flowchart by incorporating the new system
Answer:
a) Circular flow of income and expenditure will be disturbed when households spend less than their earnings.
b) Financial system can be introduced to correct the circular flow.
c) Saving is a leakage Borrowing is an injection

Question 7.
between income method and the expenditure method of national income measurement. (MARCH-2010)
Hint: The report should have
a) Title
b) Introduction
c) The main points
d) Conclusion win own observation
Answer:
Measurement of National income
Respected teachers and dear friends,
The topic of my seminar paper is ‘measurement of national income or the methods of measuring national income’. The concept of national income occupies an important place in economic theory. National income is the aggregate money value of all goods and services produced in a country during an accounting year. In this seminar paper I would like to present various methods of measuring national income. Introduction
National income can be measured in different ways. Generally, there are three methods for measuring national income. They are

• Value added method
•  Income method
• Expenditure method Value added method

The term that is used to denote the net contribution made by a firm is called its value-added. We have seen that the raw materials that a firm buys from another firm which are completely used up in the process of production are called ‘intermediate goods’. Therefore the value-added of a firm is, value of production of the firm – value of intermediate goods used by the firm. The value-added of a firm is distributed among its four factors of production, namely, labour, capital, entrepreneurship and land. Therefore wages, interest, profits and rents paid out by the firm must add up to the value-added of the firm. Value-added is a flow variable.

Expenditure Method

An alternative way to calculate the GDP is by looking at the demand side of the products. This method is referred to as the expenditure method. The aggregate value of the output in the economy by expenditure method will be calculated. In this method, we add the final expenditures that each firm makes. Final expenditure is that part of expenditure which is undertaken not for intermediate purposes.

Income Method

As we mentioned in the beginning, the sum of final expenditures in the economy must be equal to the incomes received by all the factors of production taken together (final expenditure is the spending on final goods, it does not include spending on intermediate goods). This follows from the simple idea that the revenues earned by all the firms put together must be distributed among the factors of production as salaries, wages, profits, interest earnings and rents.
That is GDP = W+ P + ln + R
Conclusion:
Thus it can be concluded that there are three methods for measuring national income. These methods are the value-added method, income method, and expenditure method. Usually, in estimating national income, different methods are employed for different sectors and sub-sectors.

Question 8.

a) Complete the chart showing circular flow of economic activity. (MARCH-2010)
b) Identify money flow and real flow from the figure.
Answer:
a)

b) Consumption expenditure and factor payments are money flows, flow of goods and services and factor services are real flows.

Question 9.
The GNP is considered as an index of welfare of a country, but there are some limitations of using GNP. Explain the three limitations. (MAY-2010)
Answer:
It is usually argued that GDP is not always a true index of welfare of a country. There are several limitations in using GDP as an index of welfare as discussed below.
1) Distribution of GDP- how uniform is it: If the GDP of the country is rising, the welfare may not rise as a consequence. This is because the rise in GDP maybe concentrated in the hands of very few individuals or firms. For the rest, the income may in fact have fallen. In such a case the welfare of the entire country cannot be said to have increased. If we relate welfare improvement in the country to the percentage of people who are better off, then surely GDP is not a good index.

2) Non-monetary exchanges: Many activities in an economy are not evaluated in monetary terms. For example, the domestic services women perform at home are not paid for. The exchanges which take place in the informal sector without the help of money are called barter exchanges. In barter exchanges goods (or services) are directly exchanged against each other. But since money is not being used here, these exchanges are not registered as part of economic activity. In developing countries, where many remote regions are underdeveloped, these kinds of exchanges do take place, but they are generally not counted in the GDPs of these countries.
This is a case of underestimation of GDP. Hence GDP calculated in the standard manner may not give us a clear indication of the productive activity and well-being of a country.
Externalities: Externalities refer to the benefits or harms a firm or individual causes to another for which they are not paid or penalized. Externalities do not have any market in which they can be bought and sold. In the case of externalities, whether positive or negative, it may not reflect the true picture of the economy. That is in the case of externality, GDP will underestimate the actual welfare of the economy.

Question 10.
using three methods: (MAY-2010)
a) Identify the three methods.
b) Prepare the equations to find out GDP with these separate methods.
Answer:
a) Product method, Income method, Expenditure method
b) Product method
Income method: GDP = C + S + T

Question 11.
Prepare a seminar report on the topic ‘Product Method and Income Method of National Income Measurement’. (MARCH-2011)
The report should contain
a) Title
b) Introduction
c) Main points
d) Conclusion with own observation
e) Order of presentation
Answer:
Measurement of National income Respected teachers and dear friends, The topic of my seminar paper is ‘measurement of national income or the methods of measuring national income’. The concept of national income occupies an important place in economic theory. National income is the aggregate money value of all goods and services produced in a country during an accounting year. In this seminar paper I would like to present various methods of measuring national income.
Introduction
National income can be measured in different ways. Generally there are three methods for measuring national income. They are

• Value added method
• Income method
• Expenditure method Value added method

The term that is used to denote the net contribution made by a firm is called its value added. We have seen that the raw materials that a firm buys from another firm which are completely used up in the process of production are called ‘intermediate goods’. Therefore the value added of a firm is, value of production of the firm – value of intermediate goods used by the fine. The value added of a firm is distributed among its four factors of production, namely, labour, capital, entrepreneurship and land. Therefore wages, interest, profits and rents paid out by the firm must add up to the value added of the firm. Value added is a flow variable.

Expenditure Method

An alternative way to calculate the GDP is by looking at the demand side of the products. This method is referred to as the expenditure method. The aggregate value of the output in the economy by expenditure method will be calculated. In this method we add the final expenditures that each firm makes. Final expenditure is that part of expenditure which is undertaken not for intermediate purposes.

Income Method

As we mentioned in the beginning, the sum of final expenditures in the economy must be equal to the incomes received by all the factors of production taken together (final expenditure is the spending on final goods, it does not include spending on intermediate goods). This follows from the simple idea that the revenues earned by all the firms put together must be distributed among the factors of production as salaries, wages, profits, interest earnings and rents.
That is GDP = W+ P + In + R
Conclusion
Thus it can be concluded that there are three methods for measuring national income. These methods are value-added method, income method and expenditure method. Usually, in estimating national income, different methods are employed for different sectors and sub-sectors.

Question 12,
Pick out the correct equation. (MARCH-2011)
a) GDP = GNP + Net factor income from abroad
b) NNP = GNP – Depreciation
c) NDP = GDP – Net Indirect Tax
d) NNP = GNP-Net Indirect Tax
Answer:
NNP = GNP – Depreciation

Question 13.
The term used to refer the benefits (or harm) a firm or an individual causes to another firm or an individual for which they are not paid is (MARCH-2012)
a) Welfare
b) Externalities
c) Transfer Payments
d) Internal Economies
Answer:
b) Externalities

Question 14.
Identify the real and nominal flows in the circular flow of income. (MARCH-2012)

Answer:
Real flows
Factor services
Final goods and services Nominal flows
Factor incomes
Expenditure on goods and services

Question 15.
GDP Deflator refers to (MARCH-2012)
a) The ratio of real to nominal GDP.
b) The ratio of nominal to real GDP.
c) The ratio of nominal N to real GDP.
d) The ratio of nominal GDP to nominal GNP.
Answer:
b) The ratio of nominal to real GDP.

Question 16.
From the data given below, calculate (MARCH-2012)
a) GDP at market price.
b) Net National Income at Factor Cost.
c) Personal income.
Data :
1) NDP at market price – ₹74,905
2) Net indirect taxes – ₹8,344
3) Income from Domestic product accruing to Govt. – ₹1,972
4) Net factor income from abroad – ₹(-) 232
5) Current transfers to households – ₹2,305
6) Depreciation – ₹4,486
Answer:
a) GDP at market price
GDP_MP = NDP_MP + Depreciation
= ₹74905 + 4486 = ₹79,391 .
b) Net National Income at factor cost
NNP_FC = NDP_MP – Net indirect tax + Net factor income from abroad = 74905-8344+ (-) 232 = 7 66,329
c) Personal income
= NNP_FC+Current transfers to households = 66329 + 2305= ₹68,634

Question 17.
List of some variables are given below. Classify them in a table into stocks and flows. (MARCH-2013)
i) Wealth
ii) Income
iii) consumption
iv) Investment
v) Expenditure
vi) Capital stock
Answer:
Stock variables

• wealth
• capital stock

flow variables

• income
• consumption
• investment
• expenditure

Question 18.
From the following information, calculate GNP and NDP (₹ in crores) (MARCH-2013)
i) GDP_MP 65,665
ii) Consumption of fixed capital 2,250
iii) Net factor income from abroad 750
Answer:
GNP = GDP + Net factor income from abroad GNP =65,665 + 750 = 66415 Crores
NDP = GDP – depreciation (Consumption of fixed capital)
NDP =65665-2250 = 63415 Crores

Question 19.
The value of the nominal GDP of India was ₹ 2,800 crores during the year 2011. The value of GDP of the country during the same year evaluated at the price of some base year was ₹3,200 crores. Find the value of GDP deflator of the year in percentage terms. (MARCH-2013)
Answer:
The ratio of nominal GDP to real GDP is known as GDP deflator

Question 20.
Though Gross Domestic Product (GDP) is often used as an indicator of economic welfare, it is not a comprehensive indicator of welfare. Elaborate. (MAY-2014)
Answer:
GDP deflator = Current year GDP / Base year GDP x 100 = 1800/1200 x 100 = 1.5 x 100
= 1.5 (in percentage terms 150)

Question 21.
Pick the odd one and justify your answer. (MAY-2014)
a) Product method
b) Deductive method
c) Income method
d) Expenditure method
Answer:
deductive method. All others are methods for measuring national income.

Question 22.
Identify central/basic economic problems. (MAY-2014)
i) What is to be produced?
ii) What is to be regulated?
iii) How goods are to be produced?
iv) How sectors are to be divided?
v) How produced output is to be divided?
vi) How much is to be produced?
Answer:
Basic economic problems are
i) what to produce
iii) how goods are to be produced
vi) how much is to produced

Question 23.
Define value added method. A farmer produces 5 quintals of wheat, out of which he sells 3 quintals to a flour mill and 1.5 quintals to consumers at the rate of ₹1000 per quintal. He retains the balance of 0.5 quintals of self-consumption. For wheat cultivation he spends ? 2000 on account of purchasing seeds and fertilizers. Calculate value added by the farmer (MARCH-2015)
Answer:
The real value added in the production process is called Gross value added.
Gross value added = Value of output – Intermediate consumption
Gross value added = 5000 – 2000 = 3000

Question 24.
Suppose in a two sector economy goods worth ₹150 crores are produced and income generated is also equal to ₹150 crores. Draw circular flow of economic activities in this economy and explain. (MAY-2015)
Answer:
The inter related process of production, income generation and expenditure is called circular flow of income. In the given two sector economy, the flow of economic activities can be in the following way.

In this sector households receive ₹150 crore for their factor services given to firms. Firms in reply, provides goods and services to household sector to firms as consumption expenditure.

Question 25.
Write down the three identities of calculating the GDP of a country by the three methods. Also explain why each of these should give us the same value of GDP.(MAY-2015)
Answer:
Gross National Product (GNP) equals Gross National Income equals Gross national expenditure i.e.
GNP = GNI = GNE
These are equal because national income is a circular flow of income. Aggregate expenditure is equal to aggregate output which in turn, is equal to aggregate income. However each method has some different items, yet they show exactly identical results. Their identity can be shown in the following manner: Reconciling Three Methods of Measuring Gross

Question 26.
Fill in the blanks :
a) A balanced budget multiplier is unity implies that ₹100 increase in ‘G’ increases National Income by (MAY-2015)
b) Gross primary deficit = ________
Answer:
a) ₹100
b) Gross primary deficit = Gross fiscal deficit – net interest liabilities.

Question 27.
Fill in the blanks : (MARCH-2016)
a) GDP + ______ = GNP
b) GNP – Depreciation = ______
c) ________ – Net Indirect Taxes = NNP_FC
(GDP – Gross Domestic Products
GNP – Gross National Products
NNP_FC – Net National product at factor cost)
Answer:
a) Net factor income from abroad
b) NNP
c) NNP_MP

Question 28.
You are to be cautions while taking only GDP (Gross Domestic Product) as index of welfare. Why so? (MARCH-2016)
Answer:
GDP deflator = Current year GDP / Base year GDP x 100
= 1800/1200 x 100
= 1.5 x 100
= 1.5 (in percentage terms 150)

Question 29.
If the quantity demanded of ‘good’ X’ increases with a rise in the price of ‘good Y’, these goods are ________ (MAY-2016)
a) complementary goods
b) Inferior goods
c) Normal goods
d) Substitute goods
Answer:
d) Substitute goods

Question 30.
Differentiate between the stock variables and flow variables with examples. (MAY-2016)
Answer:
Stocks and flows
There are differences between the concepts of stocks and flows. Stock is a variable measured at appoint of time, whereas, flow is a variable measured over a period of time. Wealth, capital etc are variables which can be measured at a point of time. Therefore, they are stock variables. At the same time, income, output, profits etc are concepts that make sense only when a time period is specified. These are called flows because they occur in a period of time. Therefore we need to delineate a time period to get a quantitative measure of these.
Net Investment -> Flow
Capital -> Stock

Question 31.
Write down the three identities of calculating the GDP of a country by the three methods. Also briefly explain why each of these should give us the same value of GDP. (MAY-2016)
Answer:
Gross National Product (GNP) equals Gross National Income equals Gross National Expenditure,
i.e. GNP = GNI = GNE
These are equal because national income is a circular flow of income. Aggregate expenditure is equal to aggregate output which in turn, is equal to aggregate income. However each method has some different items, yet they show exactly identical results. Their identity can be shown in the following manner: Reconciling Three Methods of Measuring Gross.

Kerala State Board New Syllabus Plus Two Economics Chapter Wise Previous Questions and Answers Part II Chapter 1 Introduction.

Kerala Plus Two Macroeconomics Chapter Wise Previous Questions Chapter 1 Introduction to Macroeconomics

Question 1.
Classify the following statements into two branches of Economics. (MARCH-2008)
a) Reliance Communications reduced the STD charges by 20% from November onwards.
b) The Government proposed to reduce unemployment by introducing IT-related industries.
c) RBI hiked the cash reserve ratio.
d) Maruti Udyog decided to increase the production of the brand Estilo.
Answer:
a) Micro Economics
b) Macro Economics
c) Macro Economics
d) Micro Economics

Question 2.
them in a table based on two branches of Economics. Give suitable titles to the column. General price level, Aggregate consumption,Rent for a house in a city, Demand for fish in a local market. (MARCH-2009)
Answer:

Micro	Macro
Rent of a house in a city	General price level
Demand for fish in a local market	Aggregate consumption

Question 3.
Read the following statements carefully. (MARCH-2009)
Statement i:
M/s. Sathyam Computers Ltd. decided to introduce a wage cut of 10% for the labourers in the company in November, 2008.
Statement ii:
Reserve Bank of India introduced a new credit policy for the economy in the month of October, 2008.
In which Branc of Economics do you include the statement and why?
Answer:
Micro: Individual approach
Macro: Aggregate / General approach

Question 4.
In a seminar on “Definition of Economics” a group leader presented the definition as follows: “Economics is on the one side a study of wealth and on the other side study of man”. (MAY-2009)
State the correct definition. State the name of the economist.
Answer:
Wealth definition.
According to wealth definition, “Economics is the study of the nature of wealth, its generation, and its spending”. This definition was developed by Adam Smith.

Question 5.
Classify the following statements into two branches of economics: (MAY-2009)
a) Firm’s decision about how much to invest.
b) Govt, has adopted devaluation to overcome deficit in balance of payments.
c) RBI has increased Cash Reserve Ratio to control inflation.
d) Price elasticity of luxury good is elastic.
Answer:
a) Micro economics
b) Macroeconomics
c) Macroeconomics
d) Microeconomics

Question 6.
Classify the following economic variables under suitable heads. International trade, price theory, economic growth, partial equilibrium, aggregate demand, allocation of resources. (MARCH-2010)

.	.
.	.
.	.
.	.

Answer:

Micro Economics	Macro Economics
Price theory	International trade
Partial equilibrium	Economic growth
Allocation of resources	Aggregate demand

Question 7.
According to the macro economic point of view there are four major sectors in an economy. Name these sectors. (MAY-2010)
Answer:
1)Households
2) Firms
3) Government
4) External sector

Question 8.
Classify the following in a given table under the given titles. (MARCH-2011)

Micro Economics	Macro Economics

(National Saving Rate, Wage Rate of a KSRTC worker, Average Cost, Inflation)
Answer:

Micro Economics	Macro Economics
Wage rate of KSRTC worker	National saving rate
Average cost	Inflation

Question 9.
Some variables are given below. Classify them in a Table based on the two branches of Economics. (MARCH-2012)
i) Utility
ii) Price level
iii) Inflation
iv) Demand for pen Aggregate consumption
vi) Taxes
vii) GDP
viii) Rent
Answer:

Micro Economics	Macro Economics
Utility	Inflation
Price level	Aggregate consumption
Demand for pen	Taxes
Rent	GDP

Question 10.
Keyne’s book ‘‘General Theory of Employment, Interest and money” was published in (MARCH-2013 )
Answer:
i) 1926
ii) 1936
iii) 1946
iv) 1956
Answer:
ii) 1936

Question 11.
Classify the following under the heads micro and macro economics. (MARCH-2014)
a) Govt, regulations on auto emissions
b) Price elasticity of refrigerators
c) A family’s decision about how much income to save
d) The impact of higher National Savings on Economic Growth.
Answer:
a – Macroeconomics
b – Microeconomics
c – Microeconomics
d – Macroeconomics

Question 12.
Who is known as the father of modern Macro Economics? (MARCH-2015)
a) Adam Smith
b) Alfred Marshall
c) J.M.Keynes
d) J.B.Say
Answer:
c) J.M.Keynes

Question 13.
Classify the following under two heads Micro and Macro economics. (MAY-2015)
Utility, Inflation, Price of rice, taxes, GDP, Rent received by a shop owner, Extension in demand, Aggregate demand.
Answer:

Micro Economics	Macro Economics
Utility	Inflation
Price of rice	Taxes
Rent received by a shop owner	GDP
Extention in demand	Aggregate demand

Question 14.
Distinguish the following economics systems. (MARCH-2016)
a) Centrally Planned economy
b) Market economy
Answer:
a) Centrally planned economy is an economic system where all the economic decisions are taken by the government through planning.
b) In a market economy, economic problems are solved by market forces of demand and supply. Competition are profit are the driving forces.

Question 15.
What would come in the place of question mark: (MARCH-2016)
A) (a) Wealth of Nations : 1776
(b) The general theory : ____?____
B) (a) ___?____ : Economy as a whole
(b) Micro Economics : Individual units
Answer:
A) (b) 1936
B) (a) Macroeconomics

Kerala State Board New Syllabus Plus Two Business Studies Notes Chapter 11 Marketing Management.

Kerala Plus Two Business Studies Notes Chapter 11 Marketing Management

Market

It refers to a place where the buyers and sellers meet each other for sale and purchase of the commodity.

Marketing

Marketing may be defined as all activities that are facilitating the movement of goods and services from producer to the ultimate consumer.

Features of Marketing

• Needs and Wants: Marketing focuses on satisfaction of the needs and wants of consumers.
• Creating a Market Offering: It refers to providing complete information about the product and services like name, type, price, size, etc.
• Customer Value: A buyer analyses the cost and the satisfaction that a product provides before buying it. The seller should manufacture the product keeping in view this tendency of the customer.
• Exchange Mechanism: The process of marketing involves exchange of products and services. Exchange is the essence of marketing.

Marketer

Any person, who takes more active role in the exchange process is called marketer.

Marketing Management

It refers to planning, organising, directing and controlling of the activities which facilitate exchange of goods and services between producers and consumers.

Differences between Marketing and Selling

Marketing:

1. Marketing is a wider term consisting of number of activities.
2. It is concerned with product planning and development.
3. It focuses on maximum satisfaction of the customer.
4. It aims at profits through consumer satisfaction.
5. Marketing begins before actual production.
6. It is customer oriented. Customer is important.
7. The principle of “let the seller beware” is followed.

Selling:

1. It is a narrow concept.
2. It is concerned with sale of goods already produced.
3. It focuses on the maximum satisfaction of the sellers through the exchange of products.
4. It aims at maximum profit through maximisation of sales.
5. Selling takes place after the production.
6. It is product oriented. Product is more important.
7. The principle of “let the buyer” beware is followed.

Marketing Concepts

1) The Production Concept: This concept believed that profits could be maximised by producing at large scale, thereby reducing the cost of production. Here greater emphasis was given on improving the production and distribution.
2) The Product Concept: According to this concept quality of the product is more important than quantity. Product improvement became the key to profit maximisation of a firm, under the concept of product orientation.
3) The Selling Concept: This concept focuses on the sale of products through aggressive selling and promotional techniques to persuade the buyers to buy the products,
4) The Marketing Concept: Marketing concept implies that focus on satisfaction of customer’s needs is the key to the success of any organisation in the market. Customer’s satisfaction becomes the focal point of all decision making in the organisation.
5) The Societal Marketing Concept: This concept stresses not only the customer satisfaction but also gives importance to the welfare of the society.

Functions of Marketing

1) Marketing Research: Marketing Research is a process of collecting and analysing market information to identify the needs and wants of the customers.
2) Marketing Planning: Another function of marketing is to develop appropriate marketing plans so that the marketing objectives of the organisation can be achieved.
3) Product Designing and Development: The products are designed and developed according to the needs and wants of the consumers. It requires decision making on various aspects such as the product to be manufactured, its packing, selling price, quality of the product, etc.
4) Standardisation and Grading: Standardisation refers to producing goods of predetermined specifications. Grading is the process of classification of products info different groups, on the basis of quality, size, etc.
5) Packaging and Labelling: Packaging refers to designing and developing the package forthe products. Packaging gives protection to goods. Also it attracts the consumers to buy the product. Labelling refers to designing and developing the label to be put on the package.
6) Branding: A brand is a name, term, sign, symbol, design or some combination of them, used to identify the products of one seller and to differentiate them from those of the competitors.
7) Customer Support Services: An important function of the marketing management is to develop customer support services such as after sales services, handling customer complaints, etc. which provides maximum satisfaction to the customers.
8) Pricing: Price of a product refers to the amount of money which customers have to pay to obtain a product. Price is an important factor affecting the success or failure of a product in the market. Price is fixed after taking into account the cost of production, desired profit, competitor’s price, govt, policy, etc.
9) Promotion: Promotion of products and services involves informing the customers about the firm’s product, its features, etc. and persuading them to purchase these products. It includes Advertising, Personal Selling, Publicity and Sales Promotion.
10) Physical Distribution: It includes decision regarding channels of distribution and physical movement of the product from the production centre to the consumption centre.
11) Transportation: Transportation involves physical movement of goods from one place to another. It removes the hindrance of place and creates time utility.
12) Storage or Warehousing: In order to maintain smooth flow of products in the market, there is a need for proper storage of the products. It stabilizes the prices of products and keep the product without damage until they are sold.

Role/Objectives of Marketing

1) Role in a Firm: Modern marketing emphasises that customer satisfaction is the key to the survival and growth of an organization. A satisfied customer is the most valuable asset of any firm. So product must be designed according to the needs and wants of the consumers, ensure fair distribution and determine an appropriate pricing strategy.

2) Role in the Economy: Marketing plays a significant role in the economic development of a nation. Marketing helps to increase the standard of living of the people by providing quality goods at reasonable prices. Marketing accelerates the economic activity leading to higher incomes, more consumption and increased savings and investment.

Marketing Mix

It refers to the combination of four basic marketing tools (Product, Price, Place and Promotion) that a firm uses to pursue its marketing objectives in a target market.

Elements/4 P’s of Marketing Mix

1) Product: Product means goods or services or ‘anything of value’, which is offered to the market for sale. The important product decisions include deciding about the features, quality, packaging, labelling and branding of the products.

2) Price: Price is the amount of money paid by the customers to pay to obtain the product. In most of the products, price affects the demand of the products. Desired profits, cost of production, competition, demands, etc. must be considered before fixing the price of a product.

3) Place: Place or Physical Distribution includes activities that make firm’s products available to the target customers. Important decision areas in this respect include selection of dealers, storage, warehousing and transportation of goods from the place of production to the place of consumption.

4) Promotion: Promotion includes activities that communicate availability, features, merits, etc. of the products to the target customers and persuade them to buy it. It includes advertising, personal selling, sales promotion and publicity to promote the sale of products.

Product

Product may be defined as anything that can be offered to a market to satisfy a want or need. Products may broadly be classified into two categories.

1. Consumers products
2. Industrial products

Consumers’ products

Products, which are purchased by the ultimate consumers for satisfying their personal needs and wants are referred to as consumer products.
Consumer products are classified as
a) Shopping efforts involved
b) Durability of products

a) Shopping Efforts Involved: On the basis of the time and effort, buyers are willing to spend in the purchase of a product, we can classify the consumer product into three.
1) Convenience Products: Those consumer products, which are purchased frequently, immediately and with least time and efforts are referred to as convenience goods, e.g. ice creams, medicines, newspaper, stationery items, toothpaste, etc.

2) Shopping Products: Shopping products are those consumer goods, which buyers devote considerable time, to compare the quality, price, style, suitability, etc., at several stores, before making final purchase, e.g. clothes, shoes, jewellery, furniture, etc.

3) Speciality Products: Speciality products are those consumer goods which have certain special features because of which people make special efforts in their purchase. The buyers are willing to spend a lot of time and efforts on the purchase of such products. The demand for these goods is inelastic.

b) Durability of Products: On the basis of their durability, the consumer products have been classified into three. They are:

1) Durable Products: Durable goods are used for a long period. Such goods generally require more personal selling efforts, have high profit margin, and require aftersales service.
e g. refrigerator, car, washing machine, etc.

2) Non-durable Products: The consumer products which are normally consumed in one or few uses are called non-durable products, e.g. toothpaste, detergents, bathing soap and stationery products, etc.

3) Services: Services are essentially intangible activities which provide want or need satisfaction, e.g. Medical treatment, postal, banking and | insurance services, etc.

Industrial Products

Industrial products are those products, which are used as inputs in producing other products. The examples of such products are raw materials, engines, lubricants, machines, tools, etc.

Types of industrial products:

1. Materials and Parts: These include goods that enter the manufacture’s products completely.
2. Capital Items: These goods are used in the production of finished goods.
3. Supplies and Business Services: These are short lasting goods and services that facilitate developing or managing the finished product.

Branding

The process of giving a name or a sign or a symbol, etc. to a product is called branding. Terms related with branding

• Brand: A brand is a name, term, sign, symbol, design or some combination of them, used to identify the products of one seller or group of sellers and to differentiate them from those of the competitors.
• Brand Name: That part of a brand, which can be vocalized i.e., can be spoken is called a brand name, e.g. Asian Paints, Maggie, Lifebuoy, Dunlop, etc.
• Brand Mark: A brand mark is that part of a brand which can be recognized but cannot be vocalized, i.e., non-utterable. It appears in the form of a symbol, design or distinct colour scheme. For example:‘Girl’of Amul.
• Trade Mark: A brand or part of a brand that is given legal protection against its use by other firms is called trade mark. The firm which got its brand registered with the government, gets the exclusive right for its use.-/*

Advantages of Branding

Advantages to the Firm:

• Branding helps a firm in distinguishing its product from that of its competitors.
• It helps in advertising and display Programmes.
• Branding enables a firm to charge competitive price for its products than that charged by its competitors.
• It helps in Introduction of new product in the market.

Advantages to Customers:

• Branding helps the customers in identifying the products.
• Branding ensures a particular level of quality of the product.
• Some brands become status symbols because of their quality. It creates a feeling of proud and satisfaction in the consumers.

Qualities of a Good Brand Name

• The brand name should be short, easy to pronounce, spell, recognise and remember.
• A brand should suggest the product’s benefits and qualities.
• A brand name should be distinctive.
• Brand name should be adaptable to packing or labelling requirements, to different advertising media and to different languages.
• The brand name should be sufficiently versatile to accommodate new products.
• It should be capable of being registered and protected legally.

Packaging

Packaging refers to the act of designing and producing the container or wrapper of a product. Packaging plays a very important role in the marketing success or failure of products.

Levels of Packaging:

• Primary Package: It refers to the product’s immediate container, e.g. toothpaste tube, match box, etc.
• Secondary, Packaging: It refers to additional layers of protection that are kept till the product is ready for use.
• Transportation Packaging: It refers to further packaging components necessary for storage, identification or transportation.

Functions of Packaging:

• Packaging helps in identification of the products.
• Packaging protects the product from spoilage, breakage, leakage, etc.
• It facilitates easy transfer of goods to customers.
• Packaging provides convenience in the storage of the product.
• It attracts the consumers to purchase the product.

Labelling

Labelling means putting identification marks on the package. It is a simple tag attached to the product.

Functions of Labelling:

• It describes the product, its usage, cautions in use, etc. and specify its contents.
• It helps in identifying the product.
• It helps grading the products into different categories.
• It helps in promotion of products.
• It provides information required by law.

Pricing

Price may be defined as the amount of money paid by a buyer in consideration of the purchase of a product or a service.

Factors Affecting Price Determination:
1) Product Cost: One of the most important factors affecting price of a product or service is its cost of production and distribution. Fixed Costs, Variable Costs and Semi- Variable Costs are to be considered for determining the price.

2) Demand: The price of a product is affected by the elasticity of demand of the product. If the demand of a product is inelastic, the firm is in a better position to fix higher prices.

3) Competition: Competitors’ prices and their anticipated reactions must be considered before fixing the price of a product. In case of high competition, it is desirable to keep price low.

4) Government and Legal Regulations: In order to protect the interest of public against unfair practices, prices of some essential products are regulated by the government under the Essential Commodities Act., e.g. Medicines.

5) Pricing Objectives: Another important factor affecting the fixation of price of a product is pricing objectives, e.g. maximisation of profit, market share, etc.

Place (Physical Distribution)

The third element of marketing mix is physical distribution of products and services. In order to ensure availability of products at the right place, two factors require consideration.

1. Channels of distribution
2. Physical distribution

Channels of Distribution

A channel of distribution refers to the pathway used by the manufacturer for transfer of the ownership of goods and its physical transfer to the consumers.

Types of Channels:

1. Direct channel (Zero level): Producer → Consumer
2. One level channel: Producer → Retailer → Consumer
3. Two level channel: Producer → Wholesaler → Retailer → Consumer
4. Three level channel: Producer → Agent → Wholesaler → Retailer → Consumer

Physical Distribution

Physical distribution covers all the activities required to physically move goods from manufacturers to the customers.

Components of Physical Distribution

• Order Processing
• Transportation
• Warehousing
• Inventory Control

Promotion Mix

Promotion mix refers to combination of promotional tools such as Advertising, Personal Selling, Sales Promotion, and Publicity used by an organisation to achieve its communication objectives.

Advertising

Advertising may be defined as “any paid form of non-personal presentation and promotion of ideas, goods or service of an identified sponsor”.

Merits of Advertising:
1. Advantages to Manufacturers and Traders

• Advertising helps in introducing new products.
• It stimulates the consumers to purchase the new products.
• Advertisement helps to increase the sales of new and existing products.
• It helps to increase the goodwill of the firm.
• It helps to face the competition in the market.
• It increases profit of the firm through large sales.

2. Advantages to Consumers:

• It helps the consumers to know about the various products and their prices.
• Consumers can purchase the better products easily.
• It helps in maintaining high standard of living.
• It educates the consumers about the various uses of products.

3. Advantages to the Society:

• Advertisement helps to create more employment opportunities.
• It provides an important source of income to the press, radio, T.V., etc.
• It is a source of encouragement to artists.
• It plays an important role in economic development of the country.
• It reduces number of middlemen and consumers get quality products at lower cost.

Disadvantages/Objections to Advertising

• Advertisement encourages consumers to buy unwanted goods.
• Most of the advertisements are misleading.
• Advertisement may lead to monopoly of a brand.
• Advertisement is a costly affair. So, ultimately it increases the price of the product.
• Advertisement persuades people to purchase even the inferior products.
• It undermines social and ethical values.

Personal Selling

Personal selling involves face to face contact between the seller and prospective customer with an intension of selling some products. It is a personal form of communication.

Features of Personal Selling:

• It is a direct presentation of the product to the consumers.
• Develop personal relationships with the prospective customers.
• The sales presentation can be adjusted according to the specific needs of the individual customers.
• It is possible to take a direct feedback from the customer.

Role of Personal Selling:

1) Importance to Businessmen:

• It helps in influencing the prospects about the merits of a product and thereby increasing its sale.
• Personal selling helps to develop lasting relationship between the sales persons and the customers.
• Personal selling plays very important role in the introduction stage of a new product.
• Personal selling increases the competitive strength of a business organisation.

2) Importance to Customers:

• Personal selling helps the customers in identifying their needs and wants.
• Customers get latest market information.
• Customers get expert advice and guidance in purchasing various goods and services.
• Personal selling induces customers to purchase new products.

3) Importance to Society:

• Personal selling offers greater employment opportunities.
• Personal selling provides attractive career with greater opportunities.
• Personal selling increases product standardisation and uniformity in consumption pattern.

Sales Promotion

It refers to those marketing activities other than personal selling, advertising and publicity that stimulate short term sales. Sales promotion activities include offering cash discounts, sales contests, free gift offers, and free sample distribution, etc.

Merits of Sales Promotion:

• Sales promotion activities attract attention of the people.
• Sales promotion tools can be very effective at the time of introduction of a new product in the market.
• Sales promotion helps to increase sales.
• It creates new customers and retains existing customers.
• Consumers can purchase quality products at low cost.

Limitations of Sales Promotion:

• If a firm frequently relys on sales promotion, it creates doubts in the minds of consumers about the quality of the product.
• Use of sales promotion tools may affect the image of a product.
• It is a short term incentive.

Techniques of Sales Promotion:

• Rebate : Offering products at special prices, to clear off excess inventory.
• Discount: Offering products at less than maximum retail price.
• Refund: The seller offers to refund a part of the price paid by the customer on production of some proof of purchase.
• Free gifts: Offering another product as gift along with the purchase of a product.
• Quantity Gift: Offering extra quantity of the product.
• Contests: Prize contests are organized for the consumers and winners are given attractive prizes.
• Money refund: There are certain manufacturers who promise to refund the price of the product, if it does not satisfy the consumer.
• Samples: Offer of free samples of a product to customers at the time of introduction of a new product.

Publicity

Publicity is a non-paid form of non personal communication. The tools of publicity are press conference, publication and news in the electronic media, etc. It is published or broadcasted without charging any money from the firm.

Features of Publicity:

1. Publicity is an unpaid form of communication.
2. There is no identified sponsor for the communication

Difference between Personal Selling and Advertising

Advertising:

• It is an impersonal form of communication.
• It is inflexible.
• Same message is sent to all the customers in a market segment.
• Advertising lacks direct feedback.
• The cost per person is very low.

Personal Selling:

• It is a personal form of communication.
• It is highly flexible.
• The sales talk is adjusted according to the customer’s background and needs.
• Personal selling provides direct and immediate feedback.
• The cost per person is very high.