MS-2

S.No. SECTION: A MAR

KS

1 (A) 1
2 (D) 1
3 (D) 1
4 (C) 1
5 (c ) Autonomous transactions 1

6 (A) 1
7 (B) OR 1
(c ) S=(-)80+0.50Y
8 (D) 1
9 (D) 1
or
(c ) Remittances to relative staying (i) Debit side of Current
abroad Account of Balance of
Payments

10 (A) 1
11 i. As the profits are earned in the domestic territory of India, the profits earned 3
by a branch of the foreign bank in India will be ‘included’ in domestic income of
India.
ii. Payment of salaries to its staff by an embassy located in New Delhi will ‘not be
included’ in the domestic income of India, as it is not a part of the domestic
territory of India.
iii. As interest received by an Indian resident from its abroad firms is factor income
from abroad, it will ‘not be included’ in domestic income of India.

12 When the value of domestic currency increases in relation to a foreign currency due to 3
demand and supply forces in a free market, it is termed as appreciation of the
domestic currency.
Depreciation of the domestic currency occurs when the value of domestic country’s
currency decreases in relation to the foreign currency.
For example, Increase in exchange rate is currency depreciation and decrease in
exchange rate is currency appreciation.
(i) When Rs./$ exchange rate falls from 55 to 50 , it is termed as appreciation of
domestic currency (i.e. Indian rupee) –
(ii) When Rs./$ exchange rate rises from 50 to 55, it is termed as depreciation of
domestic currency .
OR
Autonomous items are those transactions which are done in consideration of profit
while accommodating items are done in order to correct bop imbalance.
Autonomous items involves transfer of goods and services from country while
accommodating items involve movement of official reserves.
13 The Central Bank will hike the bank rate if it wants to regulate lending. Market rates 4
and other loan rates on the money market will increase as a result of this. Borrowing
will be frowned upon. The expansion of credit will be hampered by a rise in the bank
rate. Likewise, a decrease in the bank rate significantly decreases money market
lending rates, which in turn stimulates commercial and industrial activity, requiring
more credit from banks. As a result, the volume of bank credit will increase.
OR
The bank rate is the minimum rate at which the central bank discounts the first class
bills of exchange and provides credit to the commercial banks.
Increase in the bank rate makes the borrowings from the central bank costlier than
before. This reduces the lending or credit creation capacity of the commercial banks as
they get funds at a higher interest rate from the central bank. Increase in bank rate
also increases the rate at which commercial banks lend to the general public.
Consequently, credit contracts in the economy.

14 If we put maximum value of MPC, i.e., 1, we get maximum value of multiplier, i.e., ∞. 4
As against it, if we put minimum value of MPC, i.e., 0, we get the minimum value of
multiplier, i.e. 1.
So, positive relationship exists between MPC and multiplier. It means when MPC
increases, the multiplier also increases and vice-versa.MPC↑→K↑
15 (i) Investment exp. At eq. level of income S=-200+0.25Y 4
S= -200+0.25(2000)
S= -200+500
S= 300
SO, I=300
(ii) Investment multiplies S = −200 + 0.25Y,We get MPS=0.25
Value of multiplier k=1/MPS = 1/0.25 1/0.25 = 4
16 Explain 6
redistribution of income
non-monetary exchange
composition of gdp
externalities
17 Recovery of loans is a kind of capital receipt as it will lead to decline in financial assets 6
of government.
On the other hand, interest received on loans, dividend received from public
enterprises, and grants from foreign government are revenue receipts as they neither
create liability nor any reduction in assets of the government.
OR
Fiscal deficits are not necessarily inflationary.
As we know fiscal deficit shows borrowing requirement of the government.
If we borrow when there is a situation of underemployment in an economy i.e., in a
situation of deficient demand, then it is not inflationary because in a situation of
deficient demand output is held back because of lack of demand.
A high fiscal deficit (borrowing) is accompanied by higher demand and greater output
which is not inflationary.
On the other hand, if we borrow at the full employment level, then it is inflationary in
nature.
A high fiscal deficit (borrowing) is accompanied by higher prices because aggregate
demand is greater than aggregate supply at the full employment level which is always
inflationary.
Q.N. SECTION: B MAR
KS

18 (C) or b)domestic 1
19 (A) 1
20 (A) OR (A) 1
21 (B) 1
22 (a) three 1
or
(c ) Development of small scale industries

23 (A) 1
OR
(B)
24 (B) 1
25 (A) 1
26 (B) 1
27 (D) 1
28 This trend is termed as 'Jobless growth'. Jobless growth refers to a situation when 3
the economy is able to produce more goods and services without a proportionate
increase in employment opportunities. There is a situation when there is an overall
acceleration in the growth rate of GDP in the economy without corresponding
expansion in employment
opportunities.
29 Following activities can be undertaken for the improvement of the village which would 3
also generate employment
(i) Poverty alleviation programs providing employment generation opportunities such
as the construction of roads, schools, etc.
(ii) Provision of services in areas such as primary health and primary education, which
can employ educated youth of the village after training them.
(iii) Provision for safe drinking water and sanitation facilities by employees village
population in the construction of these facilities.
(iv) Providing assistance for people to buy income and employment generating assets.
OR
It refers to a situation where a number of persons are not able to find a job in a
particular season. It occurs in the case of agriculture, ice-cream factories, woolen
factories, etc
Following measures may be suggested to reduce seasonal unemployment
(i) Promotion of multiple cropping, i.e., raising more than one crop on the same piece
of land in a year.
(ii) Development of activities allied to agriculture such as animal husbandry, dairy
fanning, horticulture, etc to provide extra employment throughout the year.
(iii) Public investment in rural areas in such fields as irrigation, drainage, flood control,
land and environment, improvement of rural roads, schools, hospitals, etc.
30 Trade and investment policy reforms were initiated to: 4
i. Remove the restrictions on foreign goods and to increase international
competitiveness in Indian markets.
ii. Attract foreign investment and to promote the adoption of modern technology
into the economy.
iii. Dismantling of quantitative restrictions on imports and exports.
iv. Reduction of tariff rates
v. Removal of licensing procedures for imports.
.
OR
The inefficient management of the Indian economy led to huge amount of borrowings
from national and international financial institutions. As a result, India met with an
economic crisis in 1991 due to its failure to repay its borrowings from abroad. Crisis led
to rise in prices of essential goods. In order to overcome the crisis, India approached
IMF and World Bank for loan. The IMF and World Bank announced New Economic
Policy as a condition to support Indian economy. Thus, India needed to introduce
economic reforms:
 To maintain sufficient foreign exchange reserves
 To keep inflation under control
 To improve economic efficiency
 To remove rigidities in various areas
 To increase international competitiveness
.
31 1. Suitable physical environment: ... 4
2. Well-trained and motivated Health Workers: ...
3. Concentrate on the Patients: ...
4. Decentralizing public health services: ...
5. Infrastructural development: ...
6. Improving the doctor-population ratio: ...
7. Increasing the number of Medical Colleges

32 The Great Leap Forward (GLF) was a campaign initiated in 1958 in China. The aims of 4
this campaign are as follows:
1. The aim of the campaign was to initiate large scale industrialisation in the
country concentrating not only in the urban areas but also in the rural ones.
2. The people in the urban areas were motivated to set up industries in their
backyards.
3. In the rural areas, Commune System was implemented. Under this system,
people were engaged in collective farming.

33 Subsidy is an economic benefit, direct or indirect, granted by a government to 6

domestic producers of goods or services, often to strengthen their competitive
position against foreign companies.
It helps farmers to buy HYV seeds, fertilizers and other inputs. The burden of granting
subsidies falls on the government. The government has to bear the burden of
financing subsidies.
There is scope for improving the resource use efficiency by reducing subsidies and
aiming them better to small farmers and regions lagging behind.
34 The degree of availability of jobs, salaries and admissions related information plays an 6
important role in the determination of human capital. The availability of jobs and
admissions related information not only help the students to opt for the best choice
according to their interest areas but also leads to the effective utilisation of human
skills and knowledge. Some of the important medium of catering different information
related to jobs, eligibility criteria, posts and salaries are Employment News
(Rozgar Samachar), Employment Exchanges, various TV programs and government
and non-government websites. While on the one hand, expenditures on education
enhance human skills and their utilisations, on the other hand, the expenditure on
health improves health, efficiency, quality of living and life expectancy of people. The
expenditure incurred on the availability of medical information and health awareness
determines the health of the people. The acceptability and the use of medical
information and family welfare programmes are often obstructed by lack of its
publicity and promotion. Often people are reluctant to opt for various health measures
due to the lack of complete knowledge and information. For example, few years back,
people knew very little about polio and about its vaccination. But due to the constant
efforts by various government and non-government organisations under the Pulse
Polio Immunisation Program, people are now well aware of polio. Therefore, it is due
to the continuous publicity and various awareness campaigns, this program have
gained public consciousness. Thus, the expenditure on the spread of information (of
education and health) determines the effectiveness and efficacy of human capital.
OR
The various self-employment and wage generation programmes initiated by the
government to solve the problem of unemployment are:
(i) Food for work Programme (FWP):
ii) Prime Minister’s RozgarYojana (PMRY):
(iii) Swarna Jayanti Shahari RozgarYojana (SJSRY):
(iv) Swarnajayanthi Gram SwarozgarYojana: Sawamajayanthi Gram Swarozgar Yojana
(v) Sampoorna Grameen RozgarYojana (SGRY):.
(vi) National Food for Work Programme (NFWP):