Class 12 Macro Economics - Chapter Government Budget and Economy NCERT Solutions | Explain why the tax multiplier is smalle

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.

Does public debt impose a burden? Explain.

Explain why public goods must be provided by the government.

Suppose marginal propensity to consume is 0.75 and there is a 20 per cent proportional income tax. Find the change in equilibrium income for the following (a) Government purchases increase by 20 (b) Transfers decrease by 20.

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?

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

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

Calculate the open economy multiplier with proportional taxes, T = tY, instead of lump-sum taxes as assumed in the text.

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 do you understand by ‘parametric shift of a line’? How does a line shift when its (i) slope decreases, and (ii) its intercept increases?

Write down the three identities of calculating the GDP of a country by the three methods. Also briefly explain why each of these should give us the same value of GDP.

Would the central bank need to intervene in a managed floating system? Explain why.

What is High Powered Money?

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