Class 12 Macro Economics - Chapter Government Budget and Economy NCERT Solutions | Suppose that for a particular economy, i

Explain the relation between government deficit and government debt.

Give the relationship between the revenue deficit and the fiscal deficit.

Discuss the issue of deficit reduction.

Are fiscal deficits inflationary?

‘The fiscal deficit gives the borrowing requirement of the government’. Elucidate.

We suppose that C = 70 + 0.70Y D, I = 90, G = 100, T = 0.10Y (a) Find the equilibrium income. (b) What are tax revenues at equilibrium income? Does the government have a balanced budget?

In the above question, calculate the effect on output of a 10 per cent increase in transfers, and a 10 per cent increase in lump-sum taxes. Compare the effects of the two.

Explain why the tax multiplier is smaller in absolute value than the government expenditure multiplier.

Does public debt impose a burden? Explain.

Explain why public goods must be provided by the government.

What is marginal propensity to consume? How is it related to marginal propensity to save?

Differentiate between balance of trade and current account balance.

What are the four factors of production and what are the remunerations to each of these called?

What is a barter system? What are its drawbacks?

What is the difference between microeconomics and macroeconomics?

What is the difference between ex ante investment and ex post investment?

What are official reserve transactions? Explain their importance in the balance of payments.

Why should the aggregate final expenditure of an economy be equal to the aggregate factor payments? Explain.

What are the main functions of money? How does money overcome the shortcomings of a barter system?

What are the important features of a capitalist economy?

Suppose the GDP at market price of a country in a particular year was Rs 1,100 crores. Net Factor Income from Abroad was Rs 100 crores. The value of Indirect taxes – Subsidies was Rs 150 crores and National Income was Rs 850 crores. Calculate the aggregate value of depreciation.

Suppose C = 40 + 0.8Y D, T = 50, I = 60, G = 40, X = 90, M = 50 + 0.05Y

(a) Find equilibrium income. (b) Find the net export balance at equilibrium income (c) What happens to equilibrium income and the net export balance when the government purchases increase from 40 and 50?

What is money multiplier? What determines the value of this multiplier?

What is a ‘legal tender’? What is ‘fiat money’?

What is the difference between planned and unplanned inventory accumulation? Write down the relation between change in inventories and value added of a firm.

What is High Powered Money?

Suppose the exchange rate between the Rupee and the dollar was Rs. 30=1$ in the year 2010. Suppose the prices have doubled in India over 20 years while they have remained fixed in USA. What, according to the purchasing power parity theory will be the exchange rate between dollar and rupee in the year 2030.

Describe the four major sectors in an economy according to the macroeconomic point of view.

What is transaction demand for money? How is it related to the value of transactions over a specified period of time?

Should a current account deficit be a cause for alarm? Explain.