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?

Explain the automatic mechanism by which BoP equilibrium was achieved under the gold standard.

Why is the open economy autonomous expenditure multiplier smaller than the closed economy one?

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

If inflation is higher in country A than in Country B, and the exchange rate between the two countries is fixed, what is likely to happen to the trade balance between the two countries?

Are the concepts of demand for domestic goods and domestic demand for goods the same?

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

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

Explain ‘Paradox of Thrift’.

Suppose it takes 1.25 yen to buy a rupee, and the price level in Japan is 3 and the price level in India is 1.2. Calculate the real exchange rate between India and Japan (the price of Japanese goods in terms of Indian goods). (Hint: First find out the nominal exchange rate as a price of yen in rupees).

What is the marginal propensity to import when M = 60 + 0.06Y? What is the relationship between the marginal propensity to import and the aggregate demand function?