Income Determination in the Open Economy

Q.

What are the adverse effects of globalisation on the Indian economy?

Q.

What is the difference between balance of trade and current account balance?

Q.

Why are exports included in the estimation of domestic income?

Q.

What are the benefits of globalisation?

Q.

Will you always appreciate the rise in the exchange rate as a means to boost our exports?

Q.

What is ‘effective demand’? How will you derive the autonomous expenditure multiplier when price of final goods and the rate of interest are given?

Q. What does the average fixed cost curve look like? Why does it look so?

Q. There are no exceptions to the Law of Demand. Explain

Q. To derive AD curve for the open economy, we add and subtract .

1. exports
2. imports
3. trade balance
4. aggregate demand

Q. An increase in foreign income leads to a/an in .

1. increase
2. decrease
3. exports
4. imports

Q.

An increase in foreign income has which of the following effects?

1. Increase in imports

2. Increase in exports

3. Decrease in trade balance

4. Decrease in aggregate demand

Q. Define or explain the following concepts:

1. Demand

2. Increase in demand

3. Derived demand

4. Direct demand

5. Market demand schedule

Q. Draw a production possibility curve. What do the points inside and outside this curve indicate? Explain.

Q. When there is a change in demand leading to a shift of the Demand Curve to the right, at the same price as before, the quantity demanded will _______.

1. decrease
2. increase
3. remain the same
4. contract

Q. The point of trade balance is determined when NX is .

1. positive
2. negative
3. zero
4. less than 1

Q. Which curve is called the planning curve of a firm?

1. LAC
2. SAC
3. TC
4. TFC

Q. The intersection of the market demand and supply curves for a commodity determines __________.

1. The equilibrium price
2. The equilibrium quantity
3. The point of neither surplus nor shortage for the commodity
4. All the above

Q. Define multiplier. What is the relation between marginal propensity to consume and multiplier? Calculate the marginal propensity to consume if the value of multiplier is $4$.

Q. If, as people's income increases, the quantity demanded for a good decreases, the good is called___________.

1. A substitute
2. A normal good
3. An inferior good
4. A complement

Q. The demand curve for Giffen goods is ________.

1. upward rising
2. downward rising
3. parallel to the price axis
4. parallel to the quantity axis

Q. $\frac{1}{1-c}$ gives the economy multiplier and $\frac{1}{1-c+m}$ gives the economy multiplier.

1. open
2. mixed
3. closed
4. market

Q. Outline the steps taken in deriving saving curve from the consumption curve. Use diagram.

Q. How does giving incentives for exports influence foreign exchange rate? Explain.

Q. Perfectly inelastic demand curve is parallel to the X-axis.

1. True
2. False

Q.

What are demand and supply shocks in the international money market?

Q. For open economy aggregate demand is equal to Consumption + Investment + Government expenditure.

1. True
2. False

Q. Economic growth is growth in _____.

1. Value of total output
2. Value of industrial output
3. Value of total input
4. Value added of all sectors

Q.

The point of trade balance is determined when:

1. NX is positive

2. NX is negative

3. NX is less than 1

4. NX is zero

Q. The difference between the value of nation's visible and invisible exports and visible and invisible imports is called as __________.

1. balance of capital account
2. balance of current account
3. balance of trade
4. balance of payment

Q.

Which of the following can be values of “m”?

1. 0

2. 0.9999

3. 1.333

4. 10