Q14 of 34 Page 1

“Foreign Institutional Investors (FIIs) remained net seller in the Indian capital markets over the last few weeks”. - The Economic Times.

State and discuss the likely effects of the given statement on foreign exchange rate with reference to the Indian Economy. 4


Or


‘Many large Multinational Corporations (MNCs) have recently shifted their investments from China and have started their production in India, thereby boosting the Make in India plans of the Government’. Presuming other factors being constant, discuss the effects of the given statement on Foreign Exchange rates with reference to the Indian Economy.


Selling of foreign institutional investors FII in Indian capital market will lead to fall in the supply of foreign currency in the economy. This situation might lead to excess demand of foreign currency at the prevailing foreign exchange rate.

Or


Investments by large MNCs in India will ensure greater inflow of foreign exchange, leading to an increase in the supply of foreign currency. The situation may result into excess supply of foreign currency in the economy at the prevailing foreign exchange rate.


As a result, a new equilibrium rate of foreign exchange will be determined which will be lower than the prevailing foreign exchange rate, leading to appreciation of domestic currency.


More from this chapter

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12

Calculate the value of Marginal Propensity to Consume (MPC), if in an economy, autonomous consumption is ₹ 500 crores, ex-ante investments are ₹ 4000crores and equilibrium level of Income of the economy is ₹ 18,000 crores?

Or


Suppose in a hypothetical economy, the savings increase by ₹ 20 crores when national income increases by ₹ 100 crores. Compute the additional investments needed to attain an increase in national income by ₹ 6,000 crores?


 13

Discuss any one of the following functions of a central bank:

a)As government’s bank b) Open market operations.


 15

Elaborate the objective of ‘reallocation of resources’ in the government budget.

 16

a) ‘Real Gross Domestic Product is a better indicator of economic growth than Nominal Gross Domestic Product’. Do you agree with the given statement? Support your answer with a suitable numerical example.4

b) Calculate ‘Depreciation on Capital Asset’ from the following data 2



Or


a) ‘Circular flow of income in a two sector economy is based on the axiom that one’s expenditure is other’s income’.


Do you agree with the given statement? Support your answer with valid reasons.3


b) Calculate compensation of employees from the following data: 3