Q22 of 30 Page 1

Distinguish between marginal propensity to consume and average propensity to consume. Give a numerical example.

OR


Explain the role of taxation in reducing excess demand.




OR


One of the fiscal measures to reduce excess demand is to increase taxes. The government levies new taxes and enhances the rate of prevailing ones. It will reduce the disposable income of people, and therefore, the aggregate demand is reduced. Tax has a direct impact on one’s purchasing power. This in turn affects the aggregate demand.


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20

Foreign exchange transactions dependent on other foreign exchange transaction are called: ( choose the correct alternative)

(a)Current account transactions


(b)Capital account transactions


(c)Autonomous transactions


(d)Accommodating transaction


 21

Find net value added at factor cost (Rs lakh)

(i)Fixed capital good with a life span of 5 years 15


(ii)Raw material 6


(iii)Sale 25


(iv)Net change in stock (-) 2


(v)Taxes on production 1


 23

In an economy investment is increased by Rs. 300 crore. If marginal propensity to consume is 2/3, calculate increase in national income.

 24

Government insure expenditure to popularize yoga among the masses. Analyses its impact on gross domestic product and welfare of the people.