Download App

Economics 4 Marks Question

MODEL PAPER 5 · CBSE STD 12 Commerce (CBSE - English Medium). 4 questions.

Questions

4 Marks Question

🎯

Test yourself on this topic

4 questions · timed · auto-graded

Question 14 Marks
What is money multiplier? What determines the value of this multiplier?
Answer
Money Multiplier or deposit multiplier measures the amount of money that the banks are able to create in the form of deposits with every unit of money it keeps as reserves. It is calculated as
Money Multiplier $=\frac{1}{L R k}$
The deposits held by the banks are used for giving loans. However banks cannot use the whole of deposit for lending. It is legally compulsory for the banks to keep a certain minimum fraction of their deposits as reserves. This fraction is called the Legal Reserve Ratio and this is fixed by the Central bank.
Value of Money Multiplier Depends on two factors:
i. Amount of initial deposits (Primary Deposits)
ii. LRR (Legal Reserve Ration)
View full question & answer→
Question 24 Marks
In an economy, aggregate demand function is given by:
AD = ₹ 160 crore + 0.8Y
Autonomous consumption = ₹ 100 crore
a. Calculate the equilibrium level of income.
b. How much is the total savings at equilibrium level of income? Calculate.
Answer
a. At equilibrium: $A D=Y$
160+0.8 Y=Y
$0.2 Y=160 \Rightarrow Y=\frac{160}{0.2}=800$
b. From the aggregate demand function, MPC $=0.8$
Autonomous consumption $(\bar{C})=100$
Therefore, Consumption function equation:
$C =100+0.8$ Y Substituting $Y =800$, we get $C =100+0.8(800)=100+640=740$
$S=Y-C=800-740=60$
Therefore, Total Savings at equilibrium level of income ₹60crore
Alternately From AD function, total autonomous expenditure
$\bar{A}-\bar{C}+\bar{I}=160$
Given, $\bar{C}=100$. Therefore, $I =160-100=60$
We know that at equilibrium level of income, $S = I$
Thus, Total Savings (S) at equilibrium ₹60 crore
View full question & answer→
Question 34 Marks
$S = -60 + 0.1 Y$ is the saving function, where $S$ is Saving and $Y$ is National Income and Investment Expenditure $(I)$ is $₹ \ 4,000$ crore in an economy. Calculate the Equilibrium level of Income.
Answer
$S = -60 + 0.1Y$
$C = 60 + 0.9Y$
At equilibrium level,
$ Y = C + I$
$Y =60+0.9 Y +4000$
$Y -0.9 Y =4060$
$0.1 Y =4060$
$Y =\frac{4000}{0.1}$
$Y = ₹ \ 40,600$ crores
View full question & answer→
Generate Paper FreeAll MODEL PAPER 5 topics
4 Marks Question - Economics STD 12 Commerce Questions - Vidyadip