Class 12 Macro Economics - Chapter Determination of Income and Employment NCERT Solutions | What is ‘effective demand’?

Explain ‘Paradox of Thrift’.

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

Measure the level of ex-ante aggregate demand when autonomous investment and consumption expenditure (A) is Rs 50 crores, and MPS is 0.2 and level of income (Y) is Rs 4000 crores. State whether the economy is in equilibrium or not (cite reasons).

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?

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

Explain why public goods must be provided by the government.

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?

Distinguish between revenue expenditure and capital expenditure.

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 the difference between microeconomics and macroeconomics?

Consider an economy described by the following functions: C = 20 + 0.80Y, I = 30, G = 50, TR = 100 (a) Find the equilibrium level of income and the autonomous expenditure multiplier in the model. (b) If government expenditure increases by 30, what is the impact on equilibrium income? (c) If a lump-sum tax of 30 is added to pay for the increase in government purchases, how will equilibrium income change?

Explain the relation between government deficit and government debt.

Explain why public goods must be provided by the government.

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

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.

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 do you understand by G.S.T? How good is the system of G.S.T as compared to the old tax system? State its categories.

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

How is the exchange rate determined under a flexible exchange rate regime?