List of top Economics Questions

Medhya and Danish both had their own farms. Medhya invested in a few agricultural courses, learnt modern farming techniques, and trained her labourers on best practices related to soil fertility, crop management, pest control, etc. Whereas, Danish invested heavily in purchasing advanced farming machinery, irrigation systems, and high-quality seeds. Do you agree that Danish had made investment in human capital? Give valid reason in support of your answer.

Read the following text carefully:
Balance of Payments (BoP) systematically summarises the economic transactions of an economy with the rest of the world, over a given period of time. The BoP can be broadly divided into two accounts namely:

• Current account
• Capital account

The current account measures the transfer of goods, services, income and transfers between an economy and the rest of the world. The current account may be sub-divided into merchandise account and invisible account. Merchandise account consists of transactions related to export and import of goods. In the invisible account, there are three broad categories:

• Non-factor services such as travel, transportation, insurance etc.
• Transfer which do not involve any value in exchange.
• Income which includes compensation of employees and investment income.

The capital account reflects the net changes in financial claims on rest of the world. The capital account can be broadly broken up into two categories:

• Non-debt flows such as direct and portfolio investments.
• Debt flows such as external assistance, commercial borrowings, non-resident deposits etc.

The sum of the two accounts indicates the overall balance, which could be either in surplus or deficit. The movement in overall balance is reflected in changes in international reserves of the country. Source: \url{https://mopsi.gov.in/109-balance-payments} (adopted and modified) % Question subparts On the basis of the given text and common understanding, answer the following questions:

• (a) Define Balance of Payments.
• (b) Differentiate between the two accounts of Balance of Payments.
• (c) Give the meaning of Balance of Payments deficit with formula.

Gauhar has recently completed her fashion designing studies and started a boutique. To produce dresses for sale, she purchased various materials, including a sewing machine, fabric, buttons, and thread. These items are essential for producing the dresses. Classify the material purchased by Gauhar as Final or Intermediate goods, giving valid reasons in support of the classifications.

"National Income is always equal to Domestic income in a two-sector economy." Defend or refute the given statement with valid reasons.

Read the following statements carefully: Statement 1: In 1978, commune lands were divided into small plots to the individual households for cultivation. Statement 2: Under commune system, professionals were sent to work and learn from the countryside. In the light of the given statements, choose the correct option from the following:

Differentiate between Real flow and Money flow.

"Define 'Open Market Operations'."

Suppose for an economy, the government proposes a project for the construction of expressways with an incremental investment of ₹1,200 crore. Assuming 80% of the increase in income is spent on consumption. Estimate the following on the basis of the above information:

• Change in income (\(\Delta Y\))
• Change in consumption (\(\Delta C\))

Two friends Ramesh (a software engineer) and Pihu (a bakery owner) are discussing their contribution to the nation's economy through tax payments. Ramesh earns 8,00,000 per year, which makes him liable to pay income tax. Pihu pays Goods and Service Tax (GST) on the sale of cakes and pastries. On the basis of the given text, identify whether Ramesh is paying a direct tax or an indirect tax. Explain valid differences between the two types of taxes.

"The government generally levies higher Goods and Services Tax (GST) on socially undesirable products like cigarettes, tobacco, liquor etc." Identify and explain the indicated government budget objective in the above statement.

Assuming for a hypothetical economy, the Central Bank increases the Reserve Ratio from 20% to 25% and the total primary deposits stand at ₹1,000. Explain the effect of rise in Reserve Ratio on credit creation by commercial banks.

Justify the following statements with valid arguments:
(i) Money supply in an economy is an example of a stock variable.
(ii) The Central Bank provides several Banking services to the government.

State the meaning and significance of Gross Domestic Product (GDP) deflator.