MCQ'S

MCQ'S

MCQ's

Box A1:

Answers:

A1… d

A2… e

A3… c

A4… c

A5… c

A6… d

A7… b

A8… c

A9… d

A10… a

A11… b

A12… c

Box B1:

Answers:

B1… g

B2… c

B3… b

B4… d

B5… c

B6… a

B7… a

B8… c

Section C: Short Question Answers

C1: The given statement is true, because if the supply of money increases it will help the level of inflation to rise in order to balance the extra supply of money in the market. Other factors remain constant. The increase in the money supply minus the growth in the economy equals the true inflation rate. If the money supply grows at 12% and the economy grows at 5% then the real inflation rate is the difference which in this example is 12-5 = 7%. Just follow total money supply growth and growth in the economy and subtract one from the other to see where we stand.

Long term inflation occurs when the money supply (currency and check writing deposits) grows at a faster rate than the output of goods and services. When there is more money available than is needed to accommodate normal growth in output, consumers and businesses want to purchase more goods and services than can be produced with current resources (labour, materials, and manufacturing facilities) causing upward pressure on prices. This is often described as "too much money chasing too few goods."

C2: A change in one of the components of aggregate demand will cause a shift in the aggregate demand curve. For example there might be an increase in export demand causing an injection of foreign demand into the domestic economy. The government may also increase its own expenditure and businesses may raise the level of planned capital investment spending.

In the same way if the taxes are increased the government revenue and expenditure will also increase.

Implementation and introduction of Goods and Services Tax (GST) is one of the long-awaited critical economic reforms that ...