Money and Banking — Economics STD 12 Commerce — Question

An economy is in equilibrium. From the following data about an economy calculate autonomous consumption.

1. Income = 5000
2. Marginal propensity to save = 0.2
3. Investment expenditure = 800

Giving reasons, categories the following into stock and flow:

1. Profits.
2. Capital.
3. Savings.
4. Balance in a bank account.
5. Capital formation.
6. GDP.

Read the passage given below and answer the following questions from 1 to 4. India has scaled back expenditure, including on productive assets that aid economic growth, as the government is confronted with the risk of its budget deficit blowing out. Capital expenditure-the money spent on creating, maintaining or improving fixed assets like roads and factories-Stood at 40% of the budgeted amount in the six months to September, down from 55.5% in the year-ago period, data from the government's Controller General of Accounts show. The overall spending during the period was 49% of the budget aim compared to 53% last year. That's despite Prime Minister Narendra Modi's Government outlining measures worth more than 21 trillion rupees (281 billion) to counter the economic and social fallout of the Covid-19 outbreak. A closer look at the numbers shows the bulk of the spending was directed towards the poor and the farmers, with crucial sectors such as coal, power, shipping and steel receiving less than a third of their annual budget allocation. Spending on capital assets has so far trailed the so-called revenue expenditure that includes interest payments and overheads such as salaries, the data released last week showed. Modi's Government placed spending curbs on some ministries from April through December to manage its cash flow. Source: Business Standard, Nov. 5, 2020

1. Capital expenditure of the government ............ the assets of the government:

1. Increases
2. Decreases
3. Both [a] and [b]
4. None of these

2. Expenditure on health due to Covid-19 is ............ expenditure of the government.

1. Direct
2. Revenue
3. Both [a] and [b]
4. None of these

3. The overall spending has......... as compared to last year.

1. Increased
2. Decreased
3. Both [a] and [b]
4. None of these

4. A closer look at the numbers shows the bulk of spending was directed towards the poor and the.............?

1. Farmers
2. Labour
3. Manager
4. None of these

Explain how government budget can be helpful in bringing economic stabilisation in the economy.

Give four agency functions of commercial banks.

"Introduction of ATM outlets has brought about wasteful expenditure." Justify/ Refute.

From the following data calculate: (a) Private income, and (b) Personal disposable income:

S.No.		Rs. (in crores)
1	Income from domestic product accuring to the private sector.	4,000
2	Saving of non-departmental public entreprises.	200
3	Current transfers from government administrative departments.	150
4	Saving of private corporate sector.	400
5	Current transfers from rest of the world.	50
6	Net factor income from abroad.	-40
7	Corporation tax.	60
8	Direct personal taxes.	140

Does an excess of AD over AS always imply a situation of inflationary gap? Explain.

Explain the determination of equilibrium level of income using AD = AS approach.
OR
Explain with the help of a diagram, how aggregate demand and aggregate supply determine the equilibrium level of income.