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How are BOP transactions classified?
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BOP transactions are classified into current account transactions and capital account transactions.
When does the credit creation process end?
When total money reserves equal initial deposits.
When an Indian company invests abroad, which side of the capital account does it affect?
It is recorded on the debit side of the capital account.
Who is responsible for issuing the ₹1 currency note in India?
The Ministry of Finance.
Where are borrowings from the rest of the world recorded in the BOP?
On the credit side of the capital account.
Which is a non-debt creating capital receipt?
Recovery of loans.
Which of the following is not an invisible item in the BOP: services, transfer payments, or merchandise?
Merchandise is not an invisible item; it is a tangible item.
Why is the statement 'GDP at MP = GDP at FC + NIT' correct?
Because Market Price (MP) includes net indirect taxes (NIT), and Factor Cost (FC) does not.
What does borrowing represent in terms of fiscal policy?
Borrowing represents a fiscal deficit.
What is the Balance of Payments (BOP) deficit, and how is it calculated?
BOP deficit occurs when a country's total imports and foreign liabilities exceed its total exports and foreign assets.
Explain the relationship between income and consumption.
There is a direct relationship; as income increases, consumption also tends to increase.
What does a current account deficit indicate?
It indicates insufficient foreign exchange receipts to cover international expenditure.
How can a central bank reduce the availability of credit in the economy?
By selling securities in the open market.
Why is the statement 'If MPC = 0, change in national income' true?
Because with an MPC (marginal propensity to consume) of 0, all additional income is saved, leading to no change in national income.
How is Real GDP calculated from Nominal GDP and Price Index?
Real GDP = Nominal GDP / (Price Index / 100). If Nominal GDP is 840 and Price Index is 120, Real GDP = 700.
Explain the difference between Stock and Flow concepts in the context of Net Investment and Capital.
Net Investment is a flow concept while Capital is a stock concept.
How is LPG connection distribution related to social justice?
LPG connection distribution is considered a mark of social justice as it aims to provide equal access to resources.
What is not a problem associated with the barter system?
Unemployment is not a problem associated with barter; issues are related to divisibility, double coincidence, etc.
Identify different phases in Circular Flow Diagram.
Generation, Distribution, Disposition.
What is the nature of revenue receipts from SORs?
Revenue receipts from Statement of Receipts (SORs) do not increase liabilities.
Who is responsible for regulating the money supply in India?
The Reserve Bank of India (RBI).
What leads to inefficiency in the usage of resources in an underemployment equilibrium?
Underemployment equilibrium indicates resources are not being utilized at their full potential (Option D).
Why is the saving curve negatively sloped at zero-level income?
At zero-level income, savings are negative (dis-saving) because of consumption funded by savings or borrowing.
Identify which of the following is not a factor payment: wages, rent, scholarship, or profit.
Scholarship is not a factor payment.
What is a characteristic of public goods?
Public goods are consumed collectively by society.
How do you calculate Factor Income from Abroad with given values?
FIFA = NIFA + FIFA Abroad. If NIFA is 200 and Factor Income to Abroad is 40, then FIFA = 240.
What actions can increase the money supply in the economy?
Injections of money, commercial bank credit, and reduced tax rates increase the money supply.
Why are scholarships not included in the National Income?
Because they are classified as transfer payments, which are not a part of national production.
What differentiates revenue receipts from capital receipts?
Capital receipts result from borrowing or sale of assets, while revenue receipts come from normal business operations.
Why are car purchases by households classified as Durable Consumer Goods?
Because they involve significant investment and provide utility over time.
What is the minimum percentage of total deposits that must be maintained by commercial banks in the central bank (CRR)?
The Cash Reserve Ratio (CRR) varies and is specified by the central bank.
How does the reserve ratio determine the value of the money multiplier?
The smaller the reserve ratio, the higher the value of the money multiplier.
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