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Question 1 of 5
1. Question
Which of these is/are not the examples of fixed capital formation?
- Energy infrastructure
- Office equipment, such as computers
- Accumulation of foreign exchange reserve
Select the correct answer code:
Correct
Solution: b)
- Currency is not considered as fixed capital, it is liquid capital. Fixed capital are the assets used in the productive process.
- Examples include Building or expanding existing factory, Purchase of transport equipment and all other machineries used in the productive process.
- Increasing an economy’s capital stock also increases its capacity for production, which means an economy can produce more.
Incorrect
Solution: b)
- Currency is not considered as fixed capital, it is liquid capital. Fixed capital are the assets used in the productive process.
- Examples include Building or expanding existing factory, Purchase of transport equipment and all other machineries used in the productive process.
- Increasing an economy’s capital stock also increases its capacity for production, which means an economy can produce more.
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Question 2 of 5
2. Question
Consider the following statements:
- Stagflation is a situation in which the inflation rate is high and at the same time economic growth rate remains steadily high.
- Deflation refers to the decrease in the general price level of goods and services but inflation rate remains above zero.
Which of the above statements is/are correct?
Correct
Solution: d)
- Stagflation is a condition of slow economic growth and relatively high unemployment, or economic stagnation, accompanied by rising prices, or inflation.
- Deflation is the general decline in prices for goods and services occurring when the inflation rate falls below 0%.
Incorrect
Solution: d)
- Stagflation is a condition of slow economic growth and relatively high unemployment, or economic stagnation, accompanied by rising prices, or inflation.
- Deflation is the general decline in prices for goods and services occurring when the inflation rate falls below 0%.
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Question 3 of 5
3. Question
Aggregate demand is an important economic indicator. It can be increased by
- More investments
- Increasing bank rate by RBI
- Higher Taxation
Select the correct answer code:
Correct
Solution: a)
- Aggregate demand is the total demand for final goods and services in an economy at a given time.
- Investment creates infrastructure, generates demand for raw material, labor, provides employment and adds to the productive capacity of the economy. It is one of the most potent factors in increasing Aggregate demand (AD).
• The government has some ability to impact AD. It can give fiscal stimulus or increase taxes in order to influence how consumers spend or save. An expansionary fiscal policy (higher spending, lower taxes) causes AD to increase, while a contractionary monetary policy (e.g. high bank rates) causes AD to decrease.
Incorrect
Solution: a)
- Aggregate demand is the total demand for final goods and services in an economy at a given time.
- Investment creates infrastructure, generates demand for raw material, labor, provides employment and adds to the productive capacity of the economy. It is one of the most potent factors in increasing Aggregate demand (AD).
• The government has some ability to impact AD. It can give fiscal stimulus or increase taxes in order to influence how consumers spend or save. An expansionary fiscal policy (higher spending, lower taxes) causes AD to increase, while a contractionary monetary policy (e.g. high bank rates) causes AD to decrease.
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Question 4 of 5
4. Question
A corporate may raise capital in the primary market through
- Initial public offer
- Rights issue
- Private placement
Select the correct answer code:
Correct
Solution: c)
A corporate may raise capital in the primary market by way of an initial public offer, rights issue or private placement.
An Initial Public Offer (IPO) is the selling of securities to the public in the primary market.
A rights issue is an invitation to existing shareholders to purchase additional new shares in the company. This type of issue gives existing shareholders securities called rights.
A private placement is a sale of stock shares or bonds to pre-selected investors and institutions rather than on the open market. It is an alternative to an initial public offering (IPO) for a company seeking to raise capital for expansion.
Incorrect
Solution: c)
A corporate may raise capital in the primary market by way of an initial public offer, rights issue or private placement.
An Initial Public Offer (IPO) is the selling of securities to the public in the primary market.
A rights issue is an invitation to existing shareholders to purchase additional new shares in the company. This type of issue gives existing shareholders securities called rights.
A private placement is a sale of stock shares or bonds to pre-selected investors and institutions rather than on the open market. It is an alternative to an initial public offering (IPO) for a company seeking to raise capital for expansion.
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Question 5 of 5
5. Question
Consider the following statements.
- Tax revenue is charged on income earned by an individual or an entity and on the value of transaction of goods and services.
- Non-tax revenue includes interest charged on loans advanced by the government for various purposes.
Which of the above statements is/are correct?
Correct
Solution: c)
Tax revenue is charged on income earned by an individual or an entity (direct tax) and on the value of transaction of goods and services (indirect tax). On the other hand, non-tax revenue is charged against services provided by the government. It also includes interest charged on loans advanced by the government for various purposes.
Incorrect
Solution: c)
Tax revenue is charged on income earned by an individual or an entity (direct tax) and on the value of transaction of goods and services (indirect tax). On the other hand, non-tax revenue is charged against services provided by the government. It also includes interest charged on loans advanced by the government for various purposes.
