Government Spending as a Tool

Q.

Explain how 'Repo Rate' can be helpful in controlling credit creation.

Q.

Distinguish between Average Propensity to Consume and Marginal Propensity to Consume.

Q.

List factors that affect precautionary demand for money.

Q.

____________ are also called zero coupon bonds.

1. Trade bills

2. Call money

3. Treasury bills

4. Commercial papers

Q.

What is the value of the government spending multiplier if marginal propensity to consume is 0.6?

1. 1.333

2. 2.5

3. 0.1333

4. 0.4

Q.

Suppose marginal propensity to consume is 0.75 and there is a 20 per cent proportional income tax. Find the change in equilibrium income for the following (a) Government purchases increase by 20 (b) Transfers decrease by 20.

Q.

Which of the following is not part of fiscal policy?

1. VAT

2. Interest rates

3. Income tax

4. National insurance

Q.

What changes are observed in the composition of infrastructure requirements as the economy develops?

Q.

Calculate:

(a) GVA at MP

(b) Intermediate consumption from the following data:

$\begin{array}{cc}\text{Value of output}& 400\\ \text{Net value added at factor cost}& 160\\ \text{Depreciation}& 40\\ \text{Subsidy}& 10\\ \text{Sales tax}& 30\end{array}$

Q.

State the main objective of liberalisation policy. Why is it said that NEP is liberal?

Q.

What is the marginal propensity to import when M = 60 + 0.06Y? What is the relationship between the marginal propensity to import and the aggregate demand function?

Q.

The government spending multiplier is higher as:

1. Lower is the MPC

2. Higher is the MPC

3. Lower is the tax revenue

4. Higher is the government spending

Q.

If the government spending multiplier is found to be 2.5, what is the marginal propensity to consume?

1. 0

2. 0.4

3. 0.6

4. 1

Q.

Which among the following formulates fiscal policy?

1. RBI

2. Finance Ministry

3. President

4. Planning Commission

Q.

Fiscal policy refers to the:

1. government's ability to regulate the functioning of financial markets.

2. spending and taxing policies used by the government to influence the level of economic activity.

3. techniques used by firms to reduce its tax liability.

4. the policy by the central bank to regulate cash rate.

Q.

Giving reasons state whether the following statements are true or false:

(a) When marginal propensity to consume is zero, the value of investment multiplier will be 1.

(b) If the ratio of marginal propensity to consume and marginal propensity to save is 4: 1, the value of investment multiplier will be 4.

(c) AD curve starts from X-axis.

Q.

Which does the government not control directly?

1. Spending on defence

2. Spending on state education

3. Firms' investment decisions

4. Spending on health

Q. Total Physical Product when 3 factors are employed is -

1. 42
2. 20
3. 90
4. 60

Q.

Marginal propensity to consume is two times more than marginal propensity to save. Autonomous consumption is Rs. 80 crores. Derive the saving function.

OR

If MPC is 0.75 and income level at the consumption level of Rs. 1, 000 is Rs. 1, 200, then autonomous consumption would be Rs. 200. State true or false.

Q.

____________ refers to public revenue, expenditure and allied matters.

1. Fiscal policy

2. Monetary policy

3. Economic policy

4. None of these

Q.

Define money supply.

Q. What is the relation between marginal revenue and average revenue under perfect competition?

Q. policy refers to public revenue, expenditure and allied matters.

1. Monetary
2. Fiscal
3. Economic
4. Socio-economic

Q.

Suppose in a simple economy with no foreign sector, the MPC is equal to 0.75. How much government spending (∆G) would be needed to raise output by 100 million?

1. 75 million

2. 400 million

3. 25 million

4. 33.3 million

Q. Briefly explain the importance of public expenditure in the industrial development of developing countries.

Q. A downward sloping demand curve can be explained in terms of _______.

1. diminishing marginal utility
2. increasing marginal utility
3. diminishing total utility
4. increasing total utility

Q. Distinguish between Average Propensity to Consume (ACP) and Marginal Propensity to Consume (MPC).

Q.

Fiscal Policy refers to a policy of:

1. Money lenders

2. Government Finance

3. Commercial banks

4. Monetary authority

Q. Law of diminishing marginal utility states that as the consumer buys more units of a commodity _________.

1. total utility falls
2. marginal utility falls
3. average utility falls
4. both total and marginal utility falls

Q.

What is meant by an objective?

1. A way of reaching a target

2. A target

3. A strategy

4. A policy