Q20 of 30 Page 1

What are ‘subsidies’?

Subsidy is the money granted by the state, public body to the people in order to keep the price of the commodity low.

It is the financial assistance given by one party to another for support or development.


Subsidies lower the price of the commodity and hence increases the demand for that commodity.


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18

Primary deficit is equal to

i) Fiscal Deficit fewer Interest Payments


ii) Revenue Deficit fewer borrowings


iii) Borrowings fewer interest payments


iv) Borrowings less Fiscal Deficit.

 19

Which of the following is not a Quantitative Method of credit control? (1)

i) Open Market Operation


ii) Margin Requirements


iii) Variable Reserve Ratio


iv) Bank Rate Policy

 21

Explain how ‘Depreciation of currency’ promotes exports of a country?

 22

If in an economy:

a) Consumption function is given by C = 100 + 0.75 Y, an


b) Autonomous investment is 150 crores.


Estimate (i) Equilibrium level of income and (ii) Consumption and Savings at the


the equilibrium level of income.


OR


Explain how the economy achieves equilibrium level of income using Consumption +


Investment (C+I) approach. (3)