XAM IDEA CLASS 12 ECONOMICS PDF
Xam Idea Economics - Ebook download as PDF File .pdf), Text File .txt) or read book online. n CBSE Examination Paper– (All India) .. advice | Economics–XII Revenue receipts are those receipts which do not create a liability . Xam Idea Class 12 cittadelmonte.info - search pdf books free download Free eBook and manual for Business, Education,Finance, Inspirational, Novel, Religion. Xam idea is a unique learning experience. Each book is divided into two sections : Part A and Part B. Part A includes the Basic Concepts of the Chapters.
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Product details Reading level: VK Global Publications Pvt. English ISBN Customers who viewed this item also viewed. Xam Idea Economics Class 12 for Exam. Grewal's Double Entry Book Keeping: What are the implications of revenue deficit? State two measures to reduce this deficit. A well planned strategy is needed to strike a balance between assets and liabilities.
As a banker to the government. Revenue deficit is related to revenue expenditure and revenue receipts of the government. While borrowing increases liability of the government. Since revenue receipts and revenue expenditures are related largely to recurring expenses of the government as on administration and maintenance.
Explain two sources each of demand and supply of a foreign currency. When is the demand for a commodity said to be elastic? Define variable costs. An economic problem arises because: A rise in the price of a commodity leads to increase in quantity supplied and thus causes an upward movement along a supply curve.
When percentage change in quantity demanded is greater than percentage change in price. What causes an upward movement along a supply curve? Define marginal revenue. Variable costs are those costs which change as the level of output changes. Explain the law of supply with the help of a supply schedule.
An economy must decide as to which technique is to be used so that productivity is maximised or cost is minimised. The law of supply states that. Supply Schedule Price Quantity Rs Units 10 20 30 The above schedule shows a positive relationship between price and quantity supplied.
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This is in accordance with the law of supply. When price of a substitute good increases the quantity supplied of the concerned good decreases and there is backward shift of the supply curve. Supply curve shifts forward in case price of the substitute good decreases. Increasing returns to a factor can be shown with the help of total product curve as follows: Examination Papers— 63 9.
The supply of a good depends upon the price of related goods besides its own price and other determinants. MUX is marginal utility of commodity X. Increasing returns to a factor refers to the situation in which total product TP increases at the increasing rate. Explain with the help of a total product curve the meaning of increasing returns to a factor. In case of a single commodity. How is the supply of a commodity affected by changes in the prices of other commodities? Two basic assumptions of the law are: It implies that in a state of equilibrium.
Or The law states that the marginal utility derived from the consumption of a commodity must diminish as more units of that commodity are consumed at a point of time. The ratio of elasticity of supply of commodities A and B is 1: Calculate the percentage increase in supply of B if its price rises from Rs 10 per unit to Rs 11 per unit.. The difference between average total cost and average variable cost is equal to average fixed cost which must decrease as output increases Or must increase as output decreases.
A producer is in equilibrium when it produces that amount of output at which the difference between total revenue and total cost is maximum. Examination Papers— 65 Ans.
Explain three causes of a shift in demand curve of a commodity. A firm can enter and leave any industry. Not only is the number of sellers very large. Give two cause of a decrease in demand. The number of buyers and sellers of a commodity is very large under perfect competition. The number of firms selling a particular commodity is so large that an individual seller contributes only a small fragment to the market supply. Or Under perfect competition.
Ans Three causes of a shift in demand curve of a commodity are: If tastes and preferences shift against the commodity. When quantity demanded decreases as a result of increase in the price of the concerned commodity. The following table illustrates this situation. Increase in income causes a rightward shift of the demand curve.
Or When quantity demanded decreases as a result of change in others factors. Two possible causes of decrease in demand are: Define equilibrium price. Let us consider the following demand and supply schedules: Demand for a commodity is directly related to income of the consumer.
The price which equates market demand of a commodity with its market supply is the equilibrium price. The final burden of income tax cannot be shifted on to others and thus.
There is an inverse relation between multiplier and marginal propensity to save MPS. Deflationary gap refers to a situation of deficiency of demand when aggregate demand is short of aggregate supply corresponding to full employment level.
Give the meaning of deflationary gap. Demand deposits of commercial banks are those deposits which can be withdrawn from the bank on demand or by writing a cheque any time. Can the value of average propensity to save be negative? If yes. MPS What is the relationship between marginal propensity to save and multiplier?
Give the meaning of demand deposits of commercial banks. Why is income tax a direct tax? Examination Papers— 67 The above table shows that when price of the commodity is Rs 3.
It happens when: Higher is the value of MPS. People can deposit their cash balances as chequeable deposits or non-chequeable deposits. The most important function of the Central Bank is to control the credit activities of the commercial banks.
Most of the Central Banks in the world have divided their functions into two parts— banking department and issuing department. Two important functions of a commercial bank are as follows: A commercial bank accepts deposits from the public. By advancing loans through credit creation it contributes to money supply in the economy. Credit control refers to increase or decrease in the volume of credit money in accordance with the monetary requirement of the country.
It is the issuing department that is responsible for note issuing. Central Bank seeks to contain credit money within reasonable limits. Or Two important functions of a Central Bank are as follows: The Central Bank is the sole authority of issuing notes in the country. A bank advances loans both for productive purposes as well as consumption purposes. Calculate net value added at factor cost from the following data: Explain any two functions of a commercial bank.
Revenue receipts are those receipts which do not create either a liability or lead to reduction in assets.
Give two examples of each. Production of goods which are injurious to health is discouraged through heavy taxation. Two merits of fixed foreign exchange rate are as under: This is because different currencies are directly or indirectly convertible into gold.
Stable exchange rate prevents speculation in foreign exchange market. Two demerits of fixed foreign exchange rate are as under: Fixed exchange rate system is often supported with huge international reserves of gold. Examination Papers— 69 Ans. Explain the basis of classifying government receipts into revenue receipts and capital receipts. How can a government budget help in reallocation of resources in an economy? Through its budgetary policy.
Explain two merits and two demerits of fixed foreign exchange rate. Current account of balance of payments records the following types of transactions: Owing to huge back-up of international reserves. List the types of transactions that are recorded in the current account of balance of payments account.
While calculating national income of India from its domestic factor income. How does money solve them? This will definitely hinder the process of growth. It highlights the extent to which the government is resort to borrowing to cope with its expenditures of the year. Higher borrowing implies higher burden of repayment of loans and of interest on the future generations. Use of money overcomes the above mentioned drawbacks of barter system of exchange in the following manner: Inflation is the obvious consequence in such a situation.
Or Fiscal deficit is the excess of budgetary expenditure over the budgetary receipts of the government. On the basis of this information calculate: As this burden mounts up. Rising fiscal deficit to finance rising expenditure on non-productive activities generally causes a greater stress of demand on the existing flow of goods and services. Inflation is yet another serious implication of fiscal deficit.
State any two problems of barter system of exchange. Because these employees are normal residents of India working in foreign establishments. Following are the two problems of barter system of exchange: AS would reduce to become equal to AD. As a result. This is how AS adapts itself to AD. In Fig. Unwanted stocks with the producers would compell the producers to slash the level of planned output till it is equal to AD at point E. To clear unwanted stocks the producers would plan a cut in production.
Examination Papers— 71 Or In an economy. Is the economy in equilibrium? If not. It is only at E. Lower cost of production increases the supply of the commodity. From the following data. The reason is that there is some ideal ratio of factors of production.
If factor price decreases. Once the ideal ratio is reached. Explain the law of variable proportions. The law of variable proportions states that increasing application of the variable factor fixed factor remaining constant must ultimately cause a situation when marginal product MP and then average product AP of the variable factor start declining. Explain any two causes of a rightward shift in supply curve.
Two causes of a rightward shift in supply curve are as follow: When there is technological improvement. When demand curve shifts backward. When the price of a substitute good falls. Demand for a commodity will decrease when there is a fall in the price of substitute goods. Examination Papers— 73 variable factor would mean lesser and lesser availability of the fixed factor per unit of the variable factor.
Less will be purchased at the same price. Implying that demand curve would shift backward. Explain how the equilibrium price and quantity of a commodity are affected by a fall in the prices of its substitutes?
Foreign exchange rate is the rate at which domestic currency can be exchanged for the foreign currency in the foreign exchange market. Distinguish between current account and capital account of balance of payments account.
Define revenue deficit. Capital account balance of payments is that part of balance of payments which records items of: State two measures to reduce it. Give the meaning of foreign exchange rate.
Current account balance of payments is that part of balance of payments which records items of: Explain any two sources of supply of it. Revenue deficit is equal to the excess of total revenue expenditure over the total revenue receipts.
Two sources of supply of foreign exchange are: Explain any two causes of a leftward shift in supply curve. Two causes of leftward shift in supply curve are as under: When price of a substitute good increases. Revenue deficit occurs when: Initially equilibrium is struck at point E with OP and OQ level of equilibrium price and equilibrium quantity respectively.
Examination Papers— 75 ii Increase in Factor Prices: If factor price increases supply tends to decline and there is a leftward shift in supply curve. An important reason for Diminishing Returns to a Factor: Diminishing returns to a factor operate due to the fixity of the factor. As more and more units of a variable factor are combined with the fixed factor. Diminishing Returns to a Factor: Diminishing returns to a factor refer to a situation in which total output increases at the diminishing rate when more of the variable factor is combined with the fixed factor s of production.
Refer Fig. For a normal commodity. Give one reason for diminishing returns to a factor. Explain the chain of effects leading to change in equilibrium price and quantity of a normal good due to increase in income of its consumers. Explain the meaning of diminishing returns to a factor and diminishing returns to scale. Supply and other factors affecting demand remain unchanged. With an increase in income of the buyers in case of normal commodity. Diminishing Returns to Scale: When percentage change in output is less than percentage change in all inputs.
Capital Expenditure: It refers to that expenditure which either creates assets or causes a reduction in liabilities of the government. What types of transactions are recorded in current account of balance of payments account? Name them.
Distinguish between fixed and flexible exchange rate. Revenue Expenditure: Revenue expenditure refers to estimated expenditure of the government which does not create assets or causes a reduction in liabilities of the government. Explain the meaning of revenue expenditure and capital expenditure.
Fixed rate of exchange is a rate determined by the government of a country. To overcome the difficulties of barter system a system of direct exchange of goods against goods. Define an indifference curve. Product differentiation makes monopolistic competition different from perfect competition. State one feature of oligopoly. In perfect competition. Indifference curve is a curve showing different combinations of a set of 2-Goods.
In which market form demand curve of a firm is perfectly elastic? Name the characteristic which makes monopolistic competition different from perfect competition.
Why is demand for water inelastic? There are only a few big sellers of a commodity and a large number of buyers in the oligopoly market. Demand for water is inelastic because water is the essential of life.
Or Substitute goods are those goods which can be substituted for each other. Or Goods X and Y are substitutes. Increase in quantity demanded occurs change in factors other than price of the due to change in price of the commodity.
Increase in demand refers to increase in 1. Increase in demand occurs due to 2. Explain the effect of fall in price of Y on demand for X. Pepsi and Coca Cola. The law of diminishing marginal utility states that the marginal utility derived from the consumption of a commodity must decline as more and more units of that commodity are consumed at a point of time.
Increase in quantity demanded refers purchase of a commodity at its existing to increase in purchase of a commodity price. Explain the law of diminishing marginal utility with the help of a utility schedule.
This law can be explained with the help of the following table. If price of a commodity increases. Increase in Demand Increase in Quantity Demanded 1. PY PX falls. P As a result. Examination Papers— 79 Diagrammatic Illustration: At a price of Rs 5 per unit of commodity A. Calculate its price elasticity of supply. When its price rises by 20 per cent. PX remaining constant. Market price will fall. Given below is the cost schedule of a firm. What to produce is the problem relating to choice of goods and services to be produced.
By definition. Market supply will decrease. In case of extra-normal losses. Output Units 1 2 3 Average Variable Cost Rs 30 28 32 Calculate its marginal cost and average total cost at each given level of output. Extra-normal profits will be wiped out. Explain the implications of freedom of entry and exit of firms under perfect competition. Market price will increase. Market supply will increase. In case extra-normal profits are earned.
Its average fixed cost is Rs 20 when it produces 3 units. Extra-normal losses will be wiped out. Can we produce guns as well as tonnes of bread. Or Explain any two main features of a centrally planned economy. Its price elasticity of demand is — 1.
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Or Two main features of a centrally planned economy are as follows: Supply and other factors affecting demand remained unchanged. The equilibrium price increases from OP to OP1. When the price of a commodity falls by Rs 2 per unit.
Examination Papers— 81 No. Initially equilibrium struck at point E with OP and OQ level of equilibrium price and equilibrium quantity respectively.
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With an increase in income of the buyers of the normal commodity. Calculate its quantity demanded at the price before change which was Rs 10 per unit.
It is here that he is maximising his satisfaction. No doubt. Any departure from this point would only mean lesser satisfaction. D and E combinations.
He can buy those combinations which are not only on price line AB but also coincide with the highest indifference curve which is IC2 in this case. Using indifference curves approach. IC2 and IC3 are indifference curves. A consumer can buy any of the combinations. At equilibrium. He cannot get any combination on IC3 as it is away from price line AB.
In terms of IC analysis. IC is convex to the origin. Out of A. Examination Papers— 83 Y Fig. When total revenue is constant. State whether the following statements are true or false. Average variable cost can fall even when marginal cost is rising. Explain the law of variable proportions with the help of total product and marginal product curves.
Average product can rise even when marginal product falls. Or According to marginal cost and marginal revenue approach. Examination Papers— 85 Fig. The components of money supply are: Primary deficit is calculated by deducting interest payments from the fiscal deficit. State the components of money supply. Two sources of supply of foreign exchange are as follows: Or Explain the basis of classifying goods into intermediate and final goods. Explain how distribution of gross domestic product is its limitation as a measure of economic welfare.
State two sources of supply of foreign exchange. But the producer attains equilibrium at 5th unit only because here both the conditions of equilibrium. This is because increase in GDP implies increased flow of goods and services in the. Give the meaning of ex-ante savings. Increase in gross domestic product GDP is often taken as a measure of economic welfare. Ex-ante savings refer to the planned savings at different levels of income in the economy.
How is primary deficit calculated? Give suitable examples. It helps commercial banks to manage their financial crises. Goods are final if they have crossed the boundary line of production and are ready for use by their final users consumers or producers. Value is yet to be added to intermediate goods. But if this surplus corresponds to deficit in current account BoP then the real situation is of deficit BoP.
Central bank advances loan to such a bank against approved securities. Goods which are used by their final users are known as final goods.
Taxation and subsidies are the two principal instruments. Goods are intermediate if they are within the boundary line of production and are not ready for use by their users. Examination Papers— 87 economy. In countries like India. A government budget can help in altering distribution of income in the economy by using its fiscal instruments. The bulk of the population may have even lesser goods than before even when the overall level of GDP has tended to rise.
The central bank acts as lender of last resort for the commercial banks of the country. When the payments debit of the country are more than its receipts credit. Equitable distribution of income is a sign of social justice which is often achieved through taxation and subsidies. The gulf between haves and have-nots may increase. Shirt purchased by the household is a final good. It is important to note that borrowings from abroad are reflected as receipts in capital account BoP.
Or Goods which are used by the producers in the process of production as raw material or are purchased for resale are known as intermediate goods. It means that if a commercial bank fails to get financial accommodation from anywhere it can approach the central bank as a last resort. These are not resold.
Explain the meaning of deficit in balance of payments. If with every increase in the level of GDP. How can government budget be helpful in altering distribution of income in an economy? Shirt purchased by a firm for resale is an intermediate good.
Only fewer people tend to benefit from a larger share of the cake. On account of such receipts. This is known as CRR cash reserve ratio. Depreciation is the fall in the value of domestic currency in relation to foreign currency in a situation when exchange rate is determined by the forces of supply and demand in the international money market.
Explain the process of money creation by Commercial Banks. By creating credit. If cash reserves are say Rs 1. Following is a brief description of how it happens. Both depreciation and devaluation result in fall in the value of domestic currency in terms of foreign currency.
These are always reflected as demand deposits in favour of the borrowers. The increase or decrease in bank rate also increases or decreases the market rate of interest. They create credit in the form of demand deposits. Distinguish between devaluation and depreciation of domestic currency. So that. Demand deposits of the commercial banks are many times more than their cash reserves. This reduces borrowing by the commercial banks, implying a reduction in their cash reserves and therefore a reduction in their capacity to create credit.
Following this increase in bank rate, market rate of interest is also raised, implying a check on borrowings from the commercial banks. Hence, only when the value of MPC is greater than 0. Marginal propensity to save is the ratio between additional saving and additional income which is always positive because of positive relationship between saving and income. For example, recoveries of loans from state governments, market loans, and disinvestment.
On the other hand, revenue receipts are those receipts which do not create either a liability or lead to reduction in assets. For example, receipts from tax revenue like income tax and sales tax and receipts from non-tax revenue like interest and dividends. On the other hand, b The main differences between direct tax and indirect tax are as follows: Direct taxes are those taxes the final burden of which falls on that person who makes the payment to the government.
On the other hand, indirect taxes are those taxes which are paid to the government by one person but their final burden is borne by another person.
Rs in crore i Compensation of employees ii Profits iii Dividends 50 iv Gross national product at market price 1, v Rent vi Interest vii Gross domestic capital formation viii Net fixed capital formation ix Change in stock 50 x Factor income from abroad 60 xi Net indirect taxes Or Calculate Net National Product at Factor Cost and Gross National Disposable Income from the following: In an economy, 75 per cent of the increase in income is spent on consumption.
Investment is increased by Rs 1, crore. Ans 75 per cent of the increase in income is spent on consumption. Define an indifference map. A set of indifference curve is known as indifference map. Decrease in Demand Decrease in Quantity Demanded 1. Decrease in demand refers to decrease 1. Decrease in quantity demanded refers to in purchase of a commodity at its decrease in purchase of a commodity existing price.
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