macro Flashcards
in what form do firms make payment to the factors of production
rent, wages, interest, and profit
What are you three faces of circular flow of income
Generation, distribution and disposition
In which phase the income received by factors of production is spent on goods and services produced by firms
Disposition
In which phase, firms produce goods and services with the help of factor services
Generation phase
The phase which involves the flow of factor incomes from firms to the households is called
Distribution phase
Variable which is measured at a particular point of time is called
Stock
Variable which is measured over a period of time is called
Flow
classify the following as stock or flow:
national wealth, Quantity of wheat stored, national income, quantity of heat produced, population of India as on 31st March, number of births during 2018, money supply, expenditure, cars produced during 2019, money supply
stock: national wealth, wheat stored, population as on 31st march, money supply,
flow: cars produced during 2019, expenditure, number of births during 2018, national income, wheat produced
Real flow is also called as
Physical flow
Money flow is also called as
Nominal flow
Which flow is known as the flow of factor services from households to firms and corresponding flow of goods and services from firms to households
Real flow
Which flow refers to the flow of factor payments from firms to households for their productive services and corresponding flow of consumption expenditure from households to firms for purchase of goods and services
Nominal flow
Which flow includes exchange of money
Money flow
Which flow includes exchange of goods and services
Real flow
Apart from political frontiers, domestic territory also includes
1. Ships and aircraft owned and operated by residents
2. Fishing vessels, oil and natural gas rigs and floating platforms
3. Embassies, consulates and military establishments of a country located aboard 
Will Japan’s embassy in India be a part of Indian domestic territory?
No, it will be japan’s territory 
UN is located in USA, will it be a part of American domestic territory
No
An individual who ordinarily resides in the country and whose centre of economic interest also lies in that country is called
Normal resident of that country
Who all are not included in resident of a country
- Foreign tourists and visitors
- Foreign staff of embassies, officials
- International organisations
- Employees of international organisations
- Crew members of foreign vessels, commercial travellers and seasonal workers
- Border workers
If an American is working in the UN office in India for more than one year then he will be treated as a normal resident of which country
India
An American working in the UN office located in India for less than a year will be considered as normal resident of which country
America
Indian working in the Indian embassy in USA will be considered as normal resident of which country
India
Which income is referred to as the income received by factors of production for rendering factor services in the production process
Factor income
Which income is referred to as the income received without rendering any product or service in return
Transfer income
Old age pension, scholarship, unemployment allowance is a part of which income
Transfer income
Which income is neither included in national income or domestic income
Transfer income
Name all eight aggregates of national income
NNPfc, GNPfc, GDPfc, NDPfc, GDPmp, NDPmp, NNPmp, GNPmp
Write the definition of national income
It refers to the net value of all final goods and services produced within the domestic territory of a country as well as abroad, valued at factor cost during one year. It includes NFIA, It excludes depreciation and net indirect taxes
explain domestic income
It is the net value of all final goods and services produced in the domestic territory of a country valued at factor cost, excluding depreciation, NFIA and net indirect taxes
How many methods in national income be calculated by, name all methods
Value-added method, income method, expenditure method
give the formula for value added method?
GVAmp = GVO - IC
or
GVAmp= domestic sales + exports + change in stock + production for self consumption - IC (raw material, imports, electricity, fuel)
the problem of counting the value of an output more than once while passing through various stages of production
double counting
double counting leads to ___ estimation of national income
over
what two methods have been can be used to avoid double counting
value of final output and value added method
why is final output method not used?
because every consumer considers his production as final
formula for income method is?
NDPfc = compensation of employees + operating surplus + mixed income of self employed
OR
wages in cash + salaries in cash + wages in kind + salaries in kind + employer’s contribution to SSS + rent + royalty + interest + corporate tax + dividend + retained earnings + mixed income of self employeed
formula for expenditure method is?
GDPmp= PFCE + GFCE + GDCF + net exports
or
PFCE + GFCE + GFCF + change in stock + net exports
GFCF has how many parts?
gross business fixed investment + gross residential construction investment + gross public investment
will remittances from abroad be included in national income
no, no productive value addition
will meals to beggars given be included in national income
no, transfer payment
will indirect taxes be included in national income ?
no, transfer payments
nominal national income is also called?
national income at current prices
real national income is also called?
national income at constant price
which income provides the real picture about economic growth of a country and why?
real national income because it is measured at a fixed price. nominal national income can show rise in national income due to rise in price and no rise in output
which year is taken as base year in india?
2011-2012
formula for converting national income at current price into national income at constant price
national income at constant price = national income at current price/ current price index * 100
why is gdp not the appropriate index for welfare?
- distribution of gdp: income inequalities
- change in prices
- non market transactions not included
- externalities
- rate of population growth
_____ Refer to benefits or harms of an activity caused by firm or an individual for which they are not paid or penalised
Externalities
Environmental pollution caused by industrial plants that have a negative effect on health are an example of
Negative externality
what all does M1 comprise of?
currency and coins with public + demand deposits of commercial banks + other deposits with RBI
which measure of money is most liquid
M1
M1 is also called?
transaction money
Currency money is also called as?
Fiat money
Which money is defined as the money which is under order from the government to act as money and must be accepted for all debts?
fiat money
Which money is called as legal tender money
M1
Does legal tender money include deposits of the Indian bank and commercial banks with RBI
No
what all does M2 comprise of?
M1 + saving deposits with post office savings bank
are saving deposits with post office saving bank withdrawable by cheque
no, that is why m2 was evolved as a concept
what all does M3 comprise of?
M1 + net time deposits with banks
what all does M4 comprise of?
M3 + total deposits in post office savings bank
is national saving certificate included in M4?
no
M3 is also called?
aggregate monetary resources of the society
which is the most narrow concept and which is the most broad concept?
M1, M4
What are the primary functions of commercial bank
Accepting deposits and advancing loans
how many types of deposits are there?
Current account deposits, fixed deposits, saving deposits
deposits which are repayable by banks on demand
Current account deposit
Current account deposits are also called
Demand deposits
Which deposits can be drawn upon by cheque without any restriction
Demand deposits
On which deposits do banks pay the highest rate of interest
Fixed deposit
On which deposits do banks impose service charges for running these accounts
Current account deposits
Which deposits are deposited for a fixed period of time
Time deposits
Time deposits are also called
Fixed deposits
Which deposits are given check facility but with some restrictions imposed on number and amount of withdrawals
Saving deposits
Which deposits do not enjoy cheque-able facility
Fixed deposits
Which loan is given to the borrower against his current assets like shares, stocks, bonds et cetera
Cash credit
A credit limit is sanctioned and the amount is credited in the account holders account. The borrower may withdraw any amount within the limit credit limit and interest is charged on the amount actually drawn. Which type of loan is this
cash credit
Which loans can be recalled on demand by the bank at any time
Demand loans
Which loans are given his personal loans against some collateral security
Short-term loans
Name some secondary functions of the commercial banks
Overdraft facility, discounting bills of exchange, agency functions, general utility functions
What are the agency functions of commercial banks
Transfer of funds, collection and payment of various items, purchase and sale of foreign exchange, Purchase and sale of securities, income tax consultancy, trustee and executor, letters of reference
Commercial banks preserve the wheels of their customers as trustees and execute them after their death, which function is this
Trustee and executor
What are the five general utility functions of commercial banks
Locker facility, travellers checks, letter of credit, underwriting security, collection of statistics
It is legally compulsory for the bank to keep a certain minimum fraction of the deposits as reserves, what is this called
Legal reserve ratio
who fixes the amount of legal reserve ratio
Central bank
What is the formula for money multiplier
One upon LRR
Who issues one rupee notes and coins in India
Finance ministry
Who issues currency notes after one rupee
Reserve Bank of India
Which authority acts as a banker, agent and a financial advisor to the central government in all state governments
Reserve Bank of India
Which state does RBI not at as a financial advisor to
Jammu And Kashmir
The proportion of deposits that commercial banks are required to park with the central bank is called
Cash reserve ratio
When commercial banks fail to meet their financial requirements from other sources they approach the central banks to give loans and advances. This function of the central bank is called
Centre of the last resort
The policy adopted by the central bank of an economy in the direction of credit control or money supply is called
Monetary policy
The rate at which the central bank of a country lends money to commercial banks to meet their short-term needs is called
Re-purchase rate
Rate at which the central bank of a country lends money to commercial banks to meet their long-term needs is called
Bank rate
Bank rate is also called
Discount rate
Commercial banks park their surplus funds with the central bank, the interest paid by the central bank on such deposits is called?
Reverse repurchase rate
Buying and selling of government securities by the central bank from or to the public and commercial banks is called
Open market operations
To increase the banks ability to give credit what should the central bank do in open market operations
Purchase of securities
The minimum percentage of net demand and time liabilities to be kept by commercial banks with the central bank is called
Cash reserve ratio
The minimum percentage of net demand and time liabilities which commercial banks are required to maintain with themselves is called
Statutory liquidity ratio
How does the RBI work as custodian of cash reserves
By maintaining a certain proportion of central bank’s deposit with themselves called cash reservation
The difference between the amount of loan and market value of the security offered by the borrower against the loan is called
Margin requirement
why are margin requirements necessary
Because if a bank gives a loan equal to the value of security, then bank will suffer a loss in case of fall in price of security 
If the margin fixed by a central bank is 40% then commercial banks are allowed to give a loan up to? 
60% of the value of security
A combination of persuasion and pressure the central bank applies in order to get them to act in a manner in line with its policy is called
Moral suasion
RBI gives directions to other banks to give or not to give credit for certain purposes to particular sectors this is called?
Selective credit control
Which banks deal with the public directly, have no power to issue currency, work on the principle of maximisation of profits and can be owned and governed by the government or private sector
Commercial bank
Total value of all final goods and services which all sectors of an economy are planning to buy at a given level of income during a period of one accounting year is called
Aggregate demand
planned expenditure is also called
Aggregate demand
What are the implications of fiscal deficit
Debt trap, inflation, foreign dependence, hampers the future growth 
What are the sources of fiscal deficit financing
Borrowing and printing new currency
What is the formula for primary deficit, fiscal deficit, revenue deficit, budget deficit 
fiscal - interest payments
total exp- total receipts (except borrowing) or only borrowing
revenue exp - revenue receipts
total exp - total receipts
Neither create any liability nor cause reduction in assets
revenue receipt
Either create a liability or cause a reduction in the assets of the govt
capital receipt
Either creates assets or causes a reduction in the liabilities
capital expenditure
Neither creates any asset nor causes any reduction in the liability of company
revenue expenditure
