Case study: Read the given case study and answer the following questions :
“COVID-19 to have significant deflationary impact due to demand evaporation”. Ruling out any impact of stimulus on the price situation. Chief Economic Advisor K.V. Subramaniam on Thursday said the COVID-19 pandemic has severely dented the demand for non-essential goods, creating deflationary conditions. He also said that a good part of the Rs. 20 lakh crore stimulus package is designed in a manner that the fiscal deficit remains under control.
COVID has significant deflationary impact because demand especially for non-essential goods and services will go down significantly. Therefore, it is unlikely that there would be too much inflationary impact through fiscal deficit or stimulus package". Subramaniam told in an interview.
“The proposed stimulus package will generate demand by infusing liquidity into the system and thus perk up the economy”, the CEA said.
“RBI is also taking some strategic actions to control the impact of COVID-19 situation”, CEA further added.

Question

cdquestions Admin · Accepted Answer

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Row	Statistical Model	Elasticity
1	\(y_t=β_1+β_2\frac{1}{x_t}\epsilon_t\)	\(-\frac{β_2}{x^2_t}\)
2	\(y_t=β_1-β_2\text{ln}(x_t)+\epsilon_t\)	\(-\frac{β_2}{x^2_t}\)
3	ln(y_t) = β₁ + β₂ ln(x_t) + ε_t	β₂
4	ln(y_t) = β₁ + β₂x_t + ε_t	β₂x_t
5	ln(y_t) = β₁ + β₂ ln(x_t) + ε_t	β₂ exp(xt)
6	ln(y_t) = β₁ + β₂x_t + ε_t	\(β_2\frac{1}{\text{exp}(x_t)}\)

Stimulus Package will :

The Correct Option is B

Solution and Explanation

At full employment level of the economy, excess aggregate demand increases (Choose any one correct option) :

The Correct Option is B

Solution and Explanation

Stimulus package as given in the case study is a part of :

The Correct Option is A

Solution and Explanation

RBI may take following step to overcome the deflationary situation :

The Correct Option is C

Solution and Explanation

'Dented the market for non-essential goods means' ______

The Correct Option is B

Solution and Explanation

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