Economics Unit 3.A Quiz

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Units taught in a structured way, building on previous knowledge.

Learning concepts from different subjects together.

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The study of individual firms, producers, and markets.

The study of the overall economy, including its growth, employment, and inflation.

Study of how consumers make decisions about what and how much to buy.

How responsive quantity demanded is to changes in price.

Study of how producers make decisions about what and how much to produce.

Different structures of markets (e.g., perfect competition, monopoly).

The total income earned by all factors of production in an economy.

Government's role in the economy (taxation, spending, borrowing).

Macroeconomics analyzes the overall economy, focusing on things like national income, total employment, and inflation.

Aggregates are large economic measures like total output, overall employment, or the general price level.

Inflation theory explains how the general price level (average of all prices) changes and what causes it.

It analyzes the causes of economic growth and underdevelopment, suggesting strategies to improve living standards.

It analyzes how national income is distributed across different factors of production, such as wages, rent, interest, and profit.

Economic growth models help study strategies for accelerating economic development, like focusing on specific industries.

An economic growth model emphasizing development of basic heavy industries, like steel and energy, for sustainable growth.

Business fluctuations refer to the ups and downs in economic activity, including periods of growth and recession.

The principle that as a person consumes more of a good, the additional satisfaction (marginal utility) gained from each additional unit decreases.

A given commodity can satisfy only one specific need or desire of a person.

The additional satisfaction gained from consuming one more unit of a good.

The negative utility or dissatisfaction experienced when consuming more of a good beyond a certain point.

Circumstances where the law of diminishing marginal utility does not apply due to specific conditions.

Hobbies, like stamp collecting or reading, can defy the law of diminishing marginal utility because each additional unit (e.g., stamp, book) brings increased pleasure.

A miser's desire for money can lead to increasing marginal utility, meaning each additional rupee brings greater satisfaction. This violates the assumption of rationality.

The principle of diminishing marginal utility relies on certain assumptions, such as homogeneity (all units of the good are identical) and rationality (consumers make logical choices).

Economic fluctuations can be categorized as constant, increasing, decreasing, or fluctuating. Constant refers to a stable state, increasing signifies growth, decreasing indicates decline, and fluctuating represents ups and downs.

Obligatory government duties include providing employment opportunities, maintaining internal law and order, implementing welfare measures, and safeguarding national security. These functions are crucial for the smooth functioning of a nation.

Public finance is the branch of economics that studies the role of the government in the economy, including its revenue collection, spending, and debt management. It encompasses how governments finance their activities and the impact of those activities on the economy.

A direct tax is levied directly on the income or wealth of individuals and corporations. Examples include income tax, property tax, and capital gains tax.

An indirect tax is levied on goods and services, with the burden ultimately borne by consumers. Examples include sales tax, value-added tax (VAT), and excise duty.

Public finance focuses on government finances, revenue collection, and spending. Private finance pertains to the financial decisions of individuals and businesses. Key differences lie in the purpose, scope, and sources of funds.

Internal debt is borrowed from within the country, often from individuals or financial institutions. External debt is borrowed from external sources like international organizations or foreign governments.

Developmental expenditure aims to promote economic growth and development, such as infrastructure projects and education. Non-developmental expenditure covers essential services like defense, law enforcement, and administrative expenses.

The Reserve Bank of India (RBI) acts as the central bank, overseeing and regulating commercial banks. It requires all scheduled banks to maintain a specific amount of cash reserves with the RBI, controlling the money supply.

RBI holds and manages the country's foreign exchange reserves, aiming to keep the exchange rate of the rupee stable and ensuring it can buy and sell currencies of International Monetary Fund members.

RBI has the power to influence the amount of credit created by commercial banks. It uses tools like the bank rate, open market operations, and reserve ratios to control the money supply and inflation.

RBI acts as a central clearing house, settling accounts between its member banks. This ensures timely and efficient payments between banks.

RBI provides emergency liquidity to banks facing financial difficulties, preventing a systemic crisis in the banking system.

Commercial banks act as intermediaries between savers and investors. They accept deposits and grant loans, seeking profits while facilitating financial transactions in the country's economic system.

Commercial banks mobilize savings from the public and allocate those funds to various sectors of the economy through loans and investments, contributing to economic growth.

Commercial banks are classified as either scheduled or non-scheduled banks. Scheduled banks are governed by RBI regulations and have greater public trust.