NIOS Economics 318 Solved Paper' April 2019, NIOS Senior Secondary Solved Papers

20. State any three components of aggregate demand.               3

Ans.:- Three components of aggregate demand are:-

1. Consumption:-  This is made by households, and sometimes consumption accounts for the larger portion of aggregate demand. An increase in consumption shifts the AD curve to the right.

2. Investment :- Investment, second of the components of aggregate demand, is spending by firms on capital, not households. However, investment is also the most volatile component of AD. An increase in investment shifts AD to the right in the short run and helps improve the quality and quantity of factor of production in the long run.

3. Government Spending:- Government spending forms a large total o aggregate demand, and an increase in government spending shifts aggregate demand to the right. This spending is categorized into transfer payments and capital spending. Transfer payments include pensions and unemployment benefits  and capital spending is on things like roads, schools and hospitals. Governments spend to increase the consumption of health services, education and to re-distribute income.

21. Price elasticity of demand of a good is (-) 1. When price falls from Rs. 10 per unit to Rs. 9 per unit, the consumer buys one more unit of the good. Calculate the quantity purchased before change in price.               4

Solution:- 

Let the quantity be X.

Given P = 10, ∆P = Rs.1, Q = X units, ∆Q = 1, ed = -1

Here P = Price, ∆P = Change in price, Q = Quantity, ∆Q = change in quantity

ed =  ∆Q     X  P

                                      ∆P          Q

-1  =  1 X       10

          1           X

- 1  = 10

          X

-1x = 10

  X  = 10 – 1

  X = 9

Therefore quantity purchased before change in price was 9 units.

22. When price of a product changes of Rs. 100 per unit to Rs. 102 per unit, the producer’s sale increases from 1000 units to 1020 units. Calculate price elasticity of supply.               4

Solution:-

Given P = Rs.100, ∆P = Rs.2, Q = 1000 units, ∆Q = 20

Here P = Price, ∆P = Change in price, Q = Quantity, ∆Q = change in quantity

Therefore,

Price elasticity of supply , es = ∆Q     X  P

          ∆P          Q

      = 20     X    100

            2           1000

      = 2000

          2000

      = 1

Therefore price elasticity of supply = 1

23. Distinguish between ‘revenue deficit’ and fiscal deficit.               4

Ans.:- Difference between ‘revenue deficit’ and ‘fiscal deficit’:-

24.Calculate Net National Disposable Income. (Rs. Crore)                   4

i) Net indirect Tax         30

ii) NDP FC     370

III) Net current transfers to abroad       10

iv) Net factor income from abroad   (-) 5

v) Consumption of fixed capital     20.     

25. Distinguish between money cost and real cost. Also give an example of each.                   4

Ans: Money cost: When production cost is expressed in terms of monetary units, it is called money cost. It means the aggregate money expenditure incurred by a producer on the purchase, procurement and processing of inputs.

Real cost:- Alfred Marshall calls real cost of production as a ‘social cost’ Real cost refers to the payments made to the factors of production to compensate for disutility’s of rendering their services. It is computed in terms of the toil, trouble, pain and discomfort involved for labour, when it is engaged in production.

Example of money cost:- payment of wages,

Example of real cost:- pain of labour.

26. Explain ‘Margin requirements’ as an instrument of credit control.               4

Ans.:- Marginal Requirements:- Another important method of selected credit control in the hands of a central bank is variables in ‘margin requirements’ regulations. ‘Margin’ refers to the difference between market value of securities and the amount borrowed against these securities. This method of credit regulation was first of all tried in the USA in 1934. In recent years, it had been tried in India also to restrict speculation or hoarding in essential commodities. The essence of this method is that a bank while advancing credit against a security does not lend the full amount (full value of security) but less.

27. Calculate third quartile of wages (Rs) of 11 workers:

305,210,430,275,290,400,260,320,300,440,450               6

Solution:-

Third Quartile , Q3 = 3 (N+1) 

4

      = 3 (11+1)

4

    = 36

        4

    = 9th item which is 430

Therefore Q3 =  Rs.430/=

28. Given that MPC = 0.90 and investment increases by Rs. 300 crore, calculate (a) value of multiplies and (b) increase in income.           6

29. What does Law of supply show? Explain ‘Taxation policy of government’ as a determinant of supply.   6

Ans.:- The law of supply is the microeconomic law that states that, all other factors being equal, as the price of a good or service increases, the quantity of goods or services that suppliers offer will increase, and vice versa.

Taxation policy of government:- Government policy imposing taxes on firms, the government can affect the supply of a commodity. The government may ask business firms to pay taxes for polluting the atmosphere or for meeting government services on education, health, etc. As these taxes increase costs, firms reduce supplies. Similarly, subsidies may be given to firms so that they can produce goods needed by the society.

Often new firms are encouraged to produce some goods (e.g., software) by giving subsidies to these goods or by reducing taxes. Further, the government may use its regulatory device (e.g., industrial licensing ) to control the activities of business firms. This affects supply.

30. Explain how does a Consumer react if (a) MRS is greater than MRE and (b) MRS is less than MRE? 6

31. Calculate GNP MP (Rs. Crore)

i) Net factor income from abroad (-)5

ii) Net domestic fixed capital formation 70

iii) Net imports 10

iv) consumption of fixed capital 20

v) Change in stocks (-)30

vi) Private final consumption expenditure           500

vii) Net Indirect Tax 50

viii) Net current transfers from abroad 8

ix) Government final consumption expenditure 100 6

32. Explain two properties of standard deviation. 6

Ans.:-