INTRODUCTION TO ECONOMICS AND FINANCE
MOCK AUTUMN-2011
Marks:100 Time 3 Hours
Q.1 Highlight the main differences between Microeconomics and Macroeconomics. [M.06]
Q.2 (a) Explain any four factors on account of which the demand of a product may change even when its price remains the same. [M.04]
(b) How is it measured with the help of total outlay method?[M.04]
Q.3(a)Explain how indifference and budget line apparatus are used to derive a consumer demand curve.For a demand curve certain things are held constant, what are they? [M.10]
(b) Diagrammatically show the income and substitution effect of a price reduction for a Giffen good. [M.03]
Q.4 (a)Explain the concept of ‘Marginal Efficiency of Capital’ [M.04]
(b)What is meant by Monopolistic-Competition? Enumerate its main Characteristics. [M.04]
Q.5 Diminishing return is the result of scarcity of relevant factors of production! Discuss.[M.08]
Q.6(a) Differentiate between Nominal and Real GDP.[M.02]
(b)Enumerate the difficulties in measuring the National Income in the Developing countries.
[M.05]
Q.7Explain inflationary and deflationary gaps in the economy using appropriate diagrams.
[M.08]
Q.8 What do you understand by the term ‘fiscal policy’? What are its important objectives?
[M.04]
Q.9 Explain and illustrate Comparative cost theory of international trade.[M.10]
Q.10Analyze briefly, the causes of imbalance in our balance of payments. Is devaluation a solution of this problem? [M.08]
Q.11Write explanatory note on the quantity theory of money. What assumptions are made to prove its validity? [M.08]
Q.12Select appropriate answer of each of the following Multiple Choice Question (MCQ). Each MCQ carries ONE mark. [M.12]
(i)If the consumption function runs along the 45 0 line, the saving function will:
(a) Lie along the 45 0line(b) Lie along the vertical axis
(c) Lie along the horizontal axis(d) Be negative
(ii) Fiscal deficit can be controlled by reducing:
(a) Taxes (b) Imports
(c) Unemployment(d) Public expenditure
P.T.O
(iii)The gain from international trade depends on:
(a) Exports (b) Tariffs
(c) Imports (d) Terms of trade
(iv) Which of the following deposits can NOT be withdrawn by cheque?
(a) a PLS deposit account (b) a demand deposit
(c) a certificate of deposit (d) none of the above
(v) Which of the following demand for money is interest elastic?
(a) transaction demand for money.(b) precautionary demand for money.
(c) speculative demand for money. (d) all of the above.
(vi)The type of financial instruments that pays a specified dividend is called:
(a) Common Stock.(b) Preferred Stock.
(c) Bond.(d) IOU.
(vii) If 25% fall in price of commodity decreases total revenue of the producer by 25%, the demand would be:
(a) perfectly inelastic. (b) inelastic
(c) unit elastic (d) perfectly elastic
(viii) The total profit is maximized where:
(a) TR equals TC
(b) TR and TC curves are parallel and TC>TR.
(c) TR and TC curves are parallel
(d) TR and TC curves are parallel and TR>TC.
(ix) The break-even point of a competitive firm occurs where:
(a) Price=AFC(b) Price>AVC
(c) Price=ATC(d) Price<ATC
(x) The more elastic the supply of labour, less will be the:
(a) Consumer surplus.(b) Economic rent.
(c) Transfer payments.(d) Transfer earnings.
(xi) An employer employs 10 units of labour at a wage rate of Rs.560 per day. To attract one more unit of labour he raises the wage rate to Rs.570 per day. The marginal cost of employing an additional unit of labour is:
(a)Rs. 10(b) Rs. 670
(c) Rs. 570(d) Rs. 580
(xii) If APL is falling, MPL may be:
(a) Falling.(b) Zero
(c) Negative.(d) All of the above.