Economics Exam 2024 - Study Notes

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Questions and Answers

How does the government change income distribution?

  • Providing public goods
  • Higher taxes on the rich
  • Increased spending on the poor
  • Reducing subsidies (correct)

What is the most important capital receipt?

  • Market loan (correct)
  • Sale of public company shares
  • Foreign Aid
  • Small savings

What is the main objective of fiscal policy?

  • Achieve balanced budgets (correct)
  • Maintain inflation rates
  • Generate higher employment
  • Increase output

What is the government expenditure multiplier?

<p>$ rac{ ext{Y}}{ ext{C}}$ (A)</p> Signup and view all the answers

What is the value of the tax multiplier?

<p>$0$ (D)</p> Signup and view all the answers

Which of the following will impose a burden on the next generation?

<p>Public investment (D)</p> Signup and view all the answers

What impact does a reduction in the exchange rate have?

<p>Capital outflow increases (D)</p> Signup and view all the answers

What is the equilibrium condition for an open economy?

<p>$Y = C + I + G + X - M$ (D)</p> Signup and view all the answers

Flashcards

Fiscal Policy

Government policies aimed at influencing the economy through taxation and spending.

Government Expenditure Multiplier

The change in overall output (GDP) resulting from a change in government spending.

Tax Multiplier

The change in overall output (GDP) resulting from a change in taxes.

Consumer Price Index (CPI)

A measure of the average change in prices of a basket of goods and services consumed by a typical household over time, using a base year for comparison.

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Gross Domestic Product (GDP)

The total market value of all final goods and services produced within a country's borders in a specific time period.

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Gross National Product (GNP)

The total market value of all final goods and services produced by a country's residents, regardless of location, in a specific time period.

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Net Factor Income from Abroad

The difference between a country's GDP and GNP, representing income earned by foreign residents working in the country minus income earned by domestic residents working abroad.

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Capital Account

The balance of payments in which transactions of assets (currencies, stocks, bonds, etc.) are recorded.

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Study Notes

Economics Exam 2024 - Study Notes

  • Exam Duration: 3 hours 15 minutes
  • Total Marks: 100
  • Question Type: Objective (multiple choice) questions; 50 questions to answer from 1-100, 1 per question.
  • Instructions: Select the correct option & fill OMR sheet.

Section A - Objective Questions

  • Question 1-10: Multiple choice questions on topics related to Government Policies and Income Distribution.
  • Government policy to change income distribution: Taxing the rich, raising spending for poor etc.
  • Capital receipts: Major revenue source for governments. (e.g., market loans, sales of company shares)
  • Fiscal policy objectives: Increase output, minimize unemployment, stabilize prices, (e.g., government stimulus packages)
  • Government spending multiplier: A key concept in fiscal policy, influences economic activity.
  • Income in GDP: Increase in Real GDP
  • Satisfice Budget Multiplier: A concept relating to Budget, important for financial understanding.
  • Tax Burden: Tax imposed on goods or services consumed
  • Inflation: A general increase in the prices of goods and services in an economy over a period of time.
  • Exchange rate: The rate at which one currency can be exchanged for another.

Section B - Other Questions

  • Question 11-13: Focus on indices like consumer price index; questions for comparison between years (2020-2023).

  • Consumer Price Index (CPI): A measure of the average change over time in the prices paid by urban consumers for a basket of consumer goods and services.

  • Base Year: A reference year used for comparing prices in different periods. Usually used as a benchmark for the CPI.

  • Current Year: The year for which the CPI is being calculated. CPI for 2023 using 2010 as base year.

  • Gross Domestic Product (GDP): Total value of all goods and services produced in an economy in a year, important for comparing economic performance.

  • Gross National Product (GNP): The total value of goods and services produced by citizens of an economy in one year. Usually measures wider than GDP.

  • Relationship between GNP and GDP: If GNP is larger than GDP, the country receives more income from abroad than what it pays out to others.

  • Identifying Economic Growth: Significant increase in Real GDP (calculated using constant prices) over a period.

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