CUET UG Economics 2025 Question Paper (Available): Download Question Paper with Answer Key And Solutions PDF

Step 1: Recall the three central problems of an economy.

Every economy faces three fundamental problems due to scarcity of resources:

What to produce? – deciding which goods and services should be produced and in what quantity.
How to produce? – deciding the technique of production (labour-intensive or capital-intensive).
For whom to produce? – deciding how goods are distributed among different groups in society.


Step 2: Apply the concept to the question.

Here, the choice is between producing more of education and health services or more of military services. This is clearly about the allocation of scarce resources between different types of goods.

Step 3: Eliminate incorrect options.

- Option (A) How to produce? → relates to production technique, not relevant here.

- Option (C) Whom to produce? → relates to distribution among people, not relevant here.

- Option (D) Where to produce? → not a fundamental central problem of economics.


Step 4: Conclusion.

The correct economic problem being addressed is What to produce?


Final Answer: \[ \boxed{What to produce?} \] Quick Tip: Remember: Allocation choice → \(\textbf{What to produce?}\)
Technique choice → \(\textbf{How to produce?}\)
Distribution choice → \(\textbf{For whom to produce?}\)
This makes it easier to classify questions quickly in exams.

Step 1: Recall the concepts.

- Production Possibility Frontier (PPF): The boundary curve showing the maximum output combinations achievable.

- Isoquant Curve: Represents different input combinations producing the same output.

- Isocost Line: Represents combinations of inputs purchasable for a given cost.

- Production Possibility Set: Represents all possible combinations of goods and services that can be produced with given resources and technology. The PPF is only the boundary of this set.


Step 2: Match with the question.

The question explicitly asks about the collection of all possible combinations, not just the efficient ones. Hence, the correct term is Production Possibility Set.


Final Answer: \[ \boxed{Production Possibility Set} \] Quick Tip: Remember: The \(\textbf{set}\) = all combinations (efficient + inefficient). The \(\textbf{frontier}\) = only efficient combinations.

Step 1: Understand the scenario.

A leftward shift of demand means that at any price level, consumers want to buy less than before. This creates imbalance in the market.

Step 2: Arrange logically.

- (A) At any given price, demand is less. → First effect of demand curve shifting left.

- (C) Some producers will decrease the prices of commodity. → To clear excess stock, suppliers reduce prices.

- (B) Excess supply will be there. → As demand is less, supply exceeds demand at old price.

- (D) At new equilibrium, quantity and price will be less. → Market reaches new equilibrium with lower price and lower quantity.


Step 3: Verify order.

Thus the correct logical sequence is: (A) → (C) → (B) → (D).


Final Answer: \[ \boxed{(A), (C), (B), (D)} \] Quick Tip: When demand shifts leftward: First, demand at every price is lower. This causes excess supply. Producers lower prices. Finally, equilibrium shifts to lower price and lower quantity.

Step 1: Matching table.

Step 2: Explanation.

- (A) → (I): Cardinal Utility assumes quantitative measurability of utility.

- (B) → (III): Marginal Utility = change in total utility due to one more unit.

- (C) → (II): Law of Diminishing Marginal Utility explains declining MU.

- (D) → (IV): Marginal Rate of Substitution shows trade-off between goods.



Final Answer: \[ \boxed{(A) – (I), \; (B) – (III), \; (C) – (II), \; (D) – (IV)} \] Quick Tip: For “Match the List” type questions, always make a table to see connections clearly. Cardinal Utility = measurable satisfaction. Marginal Utility = extra satisfaction from one unit. Diminishing MU = each extra unit gives less satisfaction. MRS = sacrifice ratio between two goods.

Step 1: Definition of Budget Set.

The budget set is the set of all possible bundles of goods that a consumer can afford, given income and prices. Mathematically: \[ p_1x_1 + p_2x_2 \leq M \]
where \(p_1, p_2\) are prices of goods, \(x_1, x_2\) are quantities, and \(M\) is consumer income.

Step 2: Checking each option.

- (A) Only mentions prices and income, but not bundles → incomplete.

- (B) Correct, since budget set = all affordable bundles (within or equal to income).

- (C) Refers to producers, not consumers → wrong.

- (D) Mentions bundles, but doesn’t include affordability → incomplete.


Step 3: Conclusion.

Hence, option (B) is the most accurate definition.


Final Answer: \[ \boxed{Any bundle as long as it costs less than or equal to the income.} \] Quick Tip: The \(\textbf{budget set}\) includes all affordable bundles. The \(\textbf{budget line}\) is the boundary case where total spending equals income.

Step 1: Check each statement.

- (A) Correct → Complementary goods are consumed together (e.g., tea and sugar).

- (B) Incorrect → Market demand is obtained by horizontal summation, not vertical.

- (C) Correct → Price elasticity measures responsiveness of demand to price change.

- (D) Incorrect → Preference increase shifts demand curve rightward, not leftward.


Step 2: Eliminate wrong options.

Only (A) and (C) are correct. (B) is wrong because of the word “vertical.” (D) is wrong because demand would shift rightward.

Step 3: Conclusion.

Hence, the correct option is (2): (A), (B), (C) only.


Final Answer: \[ \boxed{(A), (B), (C)} \] Quick Tip: - \(\textbf{Market demand}\) = horizontal summation of individual demand curves.
- \(\textbf{Rightward shift}\) = increase in demand (favorable preferences).
- \(\textbf{Leftward shift}\) = decrease in demand (unfavorable preferences).

Step 1: Recall definitions.

- Supply Function: Shows the relation between the quantity supplied and price.

- Demand Function: Shows the relation between the quantity demanded and price, holding other factors constant.

- Cost Function: Relates cost with output level.

- Output Function: Relates input to output production.


Step 2: Apply to the question.

The consumer’s optimal choice of quantity in relation to the price refers directly to the demand function.

Step 3: Conclusion.

Hence, the correct answer is (B) Demand Function.


Final Answer: \[ \boxed{Demand Function} \] Quick Tip: Remember: Demand = consumer side, Supply = producer side. The demand function is always about the consumer’s optimal choice at given prices.

Step 1: Match each item logically.

- (A) Relationship between variable input and output → Total Product (IV).

- (B) Output per unit of variable input → Average Product (I).

- (C) Change in output per unit of change in input → Marginal Product (II).

- (D) Marginal product first rises, then falls with input → Law of Variable Proportions (III).


Step 2: Verify with options.

This matches option (1).


Final Answer: \[ \boxed{(A) – (IV), \; (B) – (I), \; (C) – (II), \; (D) – (III)} \] Quick Tip: - \(\textbf{Total Product:}\) Overall output.
- \(\textbf{Average Product:}\) Output per unit of input.
- \(\textbf{Marginal Product:}\) Extra output from one more unit of input.
- \(\textbf{Law of Variable Proportions:}\) MP first increases, then decreases.

Step 1: Recall the distinction between short run and long run.

- In the short run, some factors are fixed and some are variable.

- In the long run, all factors of production become variable. There are no fixed inputs in the long run.


Step 2: Evaluate options.

- (A) “At least one factor varied” → short run condition, not long run.

- (B) Correct → in the long run, all inputs (land, labour, capital, organization) can be adjusted.

- (C) Incorrect → “factor remains fixed” is wrong for long run.

- (D) Incorrect → “only one factor” applies to short run, not long run.


Step 3: Conclusion.

Thus, in the long run, all factors are variable.


Final Answer: \[ \boxed{All factors of production can be varied.} \] Quick Tip: Remember: Short run = at least one fixed input. Long run = all inputs variable.

Step 1: Recall formula.

Profit = Total Revenue – Total Cost.

Step 2: Evaluate each option.

- (A) Cost of production = expenses incurred to produce goods, not difference.

- (B) Input cost = cost of resources, not difference.

- (C) Marginal cost = change in total cost due to one more unit, not relevant here.

- (D) Profit = correct, the residual after subtracting costs from revenue.


Step 3: Conclusion.

The difference between revenue and cost is called profit.


Final Answer: \[ \boxed{Profit} \] Quick Tip: Profit = TR – TC. Positive profit → gain, negative profit → loss.

Step 1: Recall definitions.

- Marginal Product (MP): Additional output generated by using one more unit of input, keeping others constant.

- Average Product (AP): Output per unit of input.

- Total Product (TP): Total output produced by all inputs.

- Returns to Scale: Relationship between proportional increase in inputs and resulting output.


Step 2: Apply to question.

The definition matches exactly with Marginal Product.


Final Answer: \[ \boxed{Marginal Product} \] Quick Tip: Remember: - MP = extra output from one more unit of input. - AP = average output per unit. - TP = overall output.

Step 1: Recall definition of returns to scale.

- Constant returns to scale: Output increases in exact proportion to inputs → \(f(tx_1, tx_2) = t f(x_1, x_2)\).

- Increasing returns to scale: Output increases by more than proportionate → \(f(tx_1, tx_2) > t f(x_1, x_2)\).

- Decreasing returns to scale: Output increases by less than proportionate → \(f(tx_1, tx_2) < t f(x_1, x_2)\).


Step 2: Apply to question.

Since the question asks for decreasing returns to scale, the correct condition is: \[ f(tx_1, tx_2) < t f(x_1, x_2) \]


Final Answer: \[ \boxed{f(tx_1, tx_2) < t f(x_1, x_2)} \] Quick Tip: Use “less than sign” (\(<\)) for decreasing returns, “equal” for constant, and “greater than sign” (\(>\)) for increasing returns.

Step 1: Recall the concept.

Marginal cost (MC) is defined as the change in total cost resulting from producing one more unit of output. \[ MC = \frac{\Delta TC}{\Delta Q} \]

Step 2: Evaluate options.

- (A) Average cost = total cost ÷ quantity, not change.

- (B) Variable cost = cost of variable inputs, not change per unit.

- (C) Fixed cost = does not vary with output.

- (D) Short run marginal cost = correct definition, \(\Delta TC / \Delta Q\).



Final Answer: \[ \boxed{Short Run Marginal Cost} \] Quick Tip: MC is always about “extra cost for one more unit.” Use the slope of the Total Cost curve to calculate MC.

Step 1: Formula of AFC.
\[ AFC = \frac{TFC}{Q} \]
where \(TFC\) = Total Fixed Cost, \(Q\) = Output.

Step 2: Explanation.

Since TFC is constant, as output increases, AFC decreases continuously but never reaches zero. Its curve forms a rectangular hyperbola to both axes.

Step 3: Eliminate options.

- (A) Constant → wrong, AFC falls.

- (B) U-shaped → applies to AC and AVC, not AFC.

- (C) Correct → rectangular hyperbola.

- (D) Reverse hyperbola → not used in cost curves.



Final Answer: \[ \boxed{Rectangular Hyperbola} \] Quick Tip: AFC falls as output rises because fixed cost is spread over more units. Its graph is always a rectangular hyperbola.

Step 1: Recall the relationship between AC and MC.

- When \(MC < AC\), average cost decreases.

- When \(MC > AC\), average cost increases.

- When \(MC = AC\), average cost is at its minimum point.


Step 2: Apply to the question.

The marginal cost curve always cuts the average cost curve at its minimum point.


Final Answer: \[ \boxed{At minimum point of average cost curve.} \] Quick Tip: Think of AC like an average score and MC as a new score. If the new score is lower, average falls; if higher, average rises; if equal, average stays constant → minimum point.

Step 1: Recall the concept of normal profit.

Normal profit means revenue = cost (including opportunity cost). Profit = 0 (economic sense).

Step 2: Identify the point.

This occurs where total revenue = total cost, i.e., at the break-even point.

Step 3: Eliminate incorrect options.

- (B) Average profit → not the concept here.

- (C) LRAC → a curve, not a point of profit.

- (D) Fixed cost → irrelevant to profit condition.



Final Answer: \[ \boxed{Break-even Point} \] Quick Tip: Normal profit = Zero economic profit. Break-even point is where TR = TC.

Step 1: Recall profit maximisation condition.

- A firm maximises profit where \(MR = MC\). In perfect competition, \(MR = P\). Thus, profit maximisation requires \(P = MC\).

- The short run MC curve must be rising (non-decreasing) at equilibrium to ensure maximum, not minimum.

- The firm must cover at least AVC in the short run to continue production, i.e., \(P \geq AVC\).


Step 2: Evaluate statements.

- (A) Correct → \(P = MC\).

- (B) Correct → MC curve should be upward sloping.

- (C) Incorrect → Profit maximisation requires equality, not \(P \leq MC\).

- (D) Correct → Condition to continue production in the short run.


Step 3: Conclusion.

Thus, correct set is (A), (B), (D).


Final Answer: \[ \boxed{(A), (B), (D)} \] Quick Tip: Profit maximisation requires: \(P = MC\) (equilibrium). MC rising at equilibrium. \(P \geq AVC\) (shutdown condition).

Step 1: Effect of technology on costs and productivity.

Technological progress raises productivity and/or lowers per-unit costs for a given level of inputs.

Lower costs at each output level \(\rightarrow\) firms are willing to supply more at each market price.

Step 2: Translate to supply curve movement.

At every price, quantity supplied increases \(\rightarrow\) the entire supply curve shifts rightward (outward).

A leftward shift would indicate higher costs or reduced capacity, which is opposite to technological progress.


Final Answer: \[ \boxed{Technological progress shifts the supply curve to the right.} \] Quick Tip: Costs \(\downarrow\) or productivity \(\uparrow\) \(\rightarrow\) supply \(\textbf{right}\); costs \(\uparrow\) or disruptions \(\rightarrow\) supply \(\textbf{left}\).

Step 1: Identify changes.

Initial price \(P_1=Rs.\,10\), new price \(P_2=Rs.\,14\) \(\rightarrow\) \(\Delta P=4\).

Initial quantity \(Q_1=30\), new quantity \(Q_2=24\) \(\rightarrow\) \(\Delta Q=-6\).

Step 2: Use the percentage (original-base) method (common in school exams).
\[ E_d=\left|\frac{\Delta Q}{Q_1}\right|\Big/\left|\frac{\Delta P}{P_1}\right| =\frac{6/30}{4/10} =\frac{0.2}{0.4} =0.5. \]

Step 3: Interpretation.
\(E_d=0.5 < 1\) \(\rightarrow\) demand is inelastic over this price range.


Final Answer: \[ \boxed{E_d=0.5\;(inelastic)} \] Quick Tip: Unless the question explicitly says “arc/midpoint elasticity”, school/board items usually expect the simple percentage method using the \(\textbf{initial}\) values as base.

Step 1: Define a floor price.

A price floor is a legally imposed minimum price below which market transactions cannot occur. It is set above equilibrium to protect producers.

Step 2: Match options.

- MSP (Minimum Support Price) is a classic policy example of a floor price used to protect farmers’ incomes.

- (B) “Price printed” is simply the listed/marked price, not a government floor.

- (C) “Price taken by seller” and (D) “Price asked by buyer” are bargaining quotes, not statutory minima.


Final Answer: \[ \boxed{Minimum Support Price (MSP) is a price floor.} \] Quick Tip: \(\textbf{Floor}\) = minimum legal price (protects producers); \(\textbf{Ceiling}\) = maximum legal price (protects consumers).

Step 1: Recall the book.

"The General Theory of Employment, Interest and Money" was published in 1936 by John Maynard Keynes.

Step 2: Contribution.

This work laid the foundation of modern macroeconomics. Keynes challenged classical economics by arguing that aggregate demand determines the overall level of employment and output, especially during depressions.

Step 3: Elimination of wrong options.

- (A) Adam Smith → known for "Wealth of Nations" (1776).

- (B) David Ricardo → famous for "Principles of Political Economy" and comparative advantage theory.

- (C) J.S. Mill → author of "Principles of Political Economy" (1848).



Final Answer: \[ \boxed{John Maynard Keynes} \] Quick Tip: Remember: Keynes = "General Theory (1936)"; Adam Smith = "Wealth of Nations (1776)"; Ricardo = comparative advantage; Mill = political economy principles.

Step 1: Define the paradox.

The Paradox of Thrift, proposed by Keynes, states that when individuals collectively try to save more, total savings in the economy may not rise.

Step 2: Reasoning.

- Higher savings \(\rightarrow\) lower consumption \(\rightarrow\) lower aggregate demand.

- Lower demand reduces output and income \(\rightarrow\) total savings do not increase.

Step 3: Eliminate other options.

- (A) Multiplier → explains how investment increases output by multiple.

- (C) Deficient demand → general situation of insufficient demand.

- (D) Investment → refers to capital expenditure, not paradox.



Final Answer: \[ \boxed{Paradox of Thrift} \] Quick Tip: Keynes stressed that \(\textbf{aggregate demand drives the economy}\). Saving more individually may seem rational, but collectively it can harm national income.

Step 1: Recall CPI formula.
\[ CPI = \frac{Cost of basket in Current Year}{Cost of basket in Base Year} \times 100 \]

Step 2: Explanation.

- CPI requires Current Year (to observe present prices).

- CPI requires Base Year (as the reference).

- Preceding year and succeeding year are not part of CPI calculation.


Step 3: Verify options.

Only (A) and (C) are correct.


Final Answer: \[ \boxed{CPI is measured using Current Year and Base Year.} \] Quick Tip: Always remember: CPI = Current Year Prices / Base Year Prices × 100. Only these two years matter.

Step 1: Define CPI.

The Consumer Price Index (CPI) measures changes in the prices of a fixed basket of goods and services typically purchased by households (food, clothing, housing, healthcare, transport, etc.). It reflects the cost of living for a representative consumer.

Step 2: Distinguish from other indices.

- Wholesale Price Index (WPI): Measures price changes at wholesale (bulk trade) level, not directly consumer purchases.

- Capital Goods Index: Refers to industrial output index, not a price measure of consumer goods.

- Inflation: Refers to the general rise in price levels, which is measured using indices like CPI or WPI, but is not itself an index.


Step 3: Conclusion.

Since the question specifically refers to the "representative consumer", the correct answer is Consumer Price Index.


Final Answer: \[ \boxed{Consumer Price Index (CPI)} \] Quick Tip: CPI = consumer-level prices; WPI = wholesale-level prices. Inflation is measured using CPI/WPI but is not itself the index.

Step 1: Recall definitions.

- GDP at Market Price: Measured by expenditure method → \( C + I + G + (X – M) \).

- NDP at Factor Cost: Net Domestic Product after adjusting for taxes → \( NDP_{MP} – Net Product Taxes – Net Production Taxes \).

- GVA at Factor Cost: Value added measure → \( GVA at basic prices – Net Production Taxes \).

- GNP at Factor Cost: Obtained by adjusting GNP at market price → \( GNP_{MP} – Net Product Taxes – Net Production Taxes \).


Step 2: Match with List-II.

- (A) GDP at MP → (III) \( C + I + G + (X – M) \).

- (B) NDP at FC → (I).

- (C) GVA at FC → (II).

- (D) GNP at FC → (IV).


Step 3: Verify with given options.

Option (2) matches perfectly.


Final Answer: \[ \boxed{(A) – (III), \; (B) – (I), \; (C) – (II), \; (D) – (IV)} \] Quick Tip: GDP at MP is always linked with expenditure method. Net values adjust for depreciation; factor cost adjusts for net product & production taxes.

Step 1: Understand the key terms.

- Nominal GDP: Measures goods and services at current prices, affected by inflation.

- Real GDP: Measures goods and services at constant prices of a base year, removing inflation effect.


Step 2: Apply to the question.

The question clearly says “evaluated at constant prices” \(\rightarrow\) this refers to Real GDP.


Step 3: Eliminate incorrect options.

- (A) Nominal GDP → uses current prices, not constant.

- (B) Inventory → stock of goods, not GDP measure.

- (C) Inflation → general rise in price level, not GDP.



Final Answer: \[ \boxed{Real GDP} \] Quick Tip: Remember: \(\textbf{Nominal = Current Prices}\); \(\textbf{Real = Constant Prices}\). Real GDP is best for comparing growth across years.

Step 1: Recall the major functions of money.

- Medium of exchange: Replaces barter by facilitating trade.

- Unit of account: Provides a common measure of value.

- Store of value: Allows value to be saved for future use.

- Standard of deferred payments: Used to settle future payments.


Step 2: Evaluate statements.

- (A) Medium of exchange → Correct.

- (B) Unit of account → Correct.

- (C) Bartering → Wrong; barter exists when money is absent.

- (D) Store of value → Correct.


Step 3: Conclusion.

Correct set of functions = (A), (B), (D).


Final Answer: \[ \boxed{(A), (B), (D)} \] Quick Tip: Money has 4 classic functions: \(\textbf{medium of exchange, unit of account, store of value, standard of deferred payments}\).

Step 1: Recall banking balance sheet structure.

- Assets: Loans, investments, reserves → things the bank owns.

- Liabilities: Deposits, borrowings → things the bank owes.


Step 2: Apply to deposits.

Deposits are funds that customers can withdraw at any time. Hence, they are obligations of the bank. That means they are liabilities.


Step 3: Eliminate other options.

- (A) Assets → wrong, loans given by banks are assets, not deposits.

- (B) Net worth → refers to capital + reserves, not deposits.

- (D) SLR → regulatory requirement, not deposits.



Final Answer: \[ \boxed{Liabilities} \] Quick Tip: For banks: \(\textbf{Deposits = Liabilities}\), \(\textbf{Loans = Assets}\). This is opposite to the customer’s perspective.

Step 1: Understand each term.

- CRR (Cash Reserve Ratio): Portion of commercial bank deposits that must be kept as cash reserves with the RBI.

- SLR (Statutory Liquidity Ratio): Portion of deposits that must be kept in liquid assets like cash, gold, or approved securities.

- Lender of last resort: Role of the Central Bank (RBI in India) to provide emergency funds when banks face liquidity crisis.

- Repo Rate: Rate at which the Central Bank lends money to commercial banks against securities.


Step 2: Match with List-II.

- (A) CRR → (III) Cash reserves with the Central Bank.

- (B) SLR → (IV) Reserves in liquid form.

- (C) Lender of last resort → (I) Central Bank of the country.

- (D) Repo Rate → (II) Interest rate charged by Central Bank.


Step 3: Verify with options.

This matches option (2).


Final Answer: \[ \boxed{(A) – (III), \; (B) – (IV), \; (C) – (I), \; (D) – (II)} \] Quick Tip: Remember: CRR = cash with RBI, SLR = liquid assets, Repo = RBI lending rate, Lender of last resort = Central Bank safeguard.

Step 1: Define Fiat Money.

Fiat money is currency issued by the government or central bank which has no intrinsic value but is accepted as money because of legal backing. Notes and coins are fiat money.


Step 2: Distinguish from other terms.

- Broad Money: Includes currency + demand deposits + time deposits + other liquid assets.

- Currency Base: Refers to high-powered money (currency in circulation + reserves with banks).

- Narrow Money: Refers to M1 = currency in circulation + demand deposits. Not limited to just coins/notes.


Step 3: Apply to the question.

Since the question explicitly refers to notes and coins, these are Fiat Money.


Final Answer: \[ \boxed{Fiat Money} \] Quick Tip: Notes and coins = \(\textbf{Fiat Money}\). Broad money and narrow money are aggregates; currency base is high-powered money.

Step 1: Understand Ex-ante vs Ex-post.

- Ex-ante: Refers to planned or expected values before an event occurs (e.g., planned investment).

- Ex-post: Refers to actual realized values after the event has occurred (e.g., actual investment).


Step 2: Apply to the question.

The term “Ex-post” always means “what actually happened” in reality, not what was planned.


Step 3: Eliminate options.

- (B) What will happen → future oriented, wrong.

- (C) Planned → Ex-ante, wrong.

- (D) What should plan be → normative, wrong.



Final Answer: \[ \boxed{What actually has happened} \] Quick Tip: Remember: \(\textbf{Ex-ante = planned}\), \(\textbf{Ex-post = actual}\). Useful in investment and saving analysis.

Step 1: Recall government functions.

- Allocative Function: Proper allocation of resources between private and public goods.

- Distribution Function: Redistribution of income and wealth through taxes and subsidies.

- Stabilization Function: Government intervention to maintain stability in prices, output, and employment.

- Fiscal Function: General role of government in taxation and expenditure.


Step 2: Apply to the question.

The question mentions “expand or reduce demand”, which directly refers to stabilization policies (using fiscal/monetary measures to control aggregate demand).



Final Answer: \[ \boxed{Stabilization Function} \] Quick Tip: Stabilization = controlling demand, inflation, and unemployment. Allocative = resource allocation; Distribution = equity.

Step 1: Define the terms.

- Balance of Trade (BoT): Difference between the monetary value of exports and imports of goods (merchandise trade).

- Balance of Payments (BoP): Comprehensive record of all economic transactions (goods, services, capital) with the rest of the world.

- Capital Account Deficit: Deficit in international capital transactions.

- Net Invisibles: Balance of services, transfers, and income flows, not merchandise.


Step 2: Apply to the question.

The question refers only to “exports and imports of goods”. This is exactly the definition of Balance of Trade.



Final Answer: \[ \boxed{Balance of Trade} \] Quick Tip: BoT = goods only. BoP = goods + services + capital. Net Invisibles = services and transfers.

Step 1: Recall the income method steps.

1. Identify and classify producing units → ensures which firms contribute to national income.

2. Classify factor incomes → wages, rent, interest, profit.

3. Estimate Net Domestic Product at Factor Cost (NDP_FC).

4. Add Net Factor Income from Abroad to obtain Net National Product at Factor Cost (NNP_FC).


Step 2: Apply to the sequence.

(A) First step → Identify firms.

(D) Second step → Classify factor incomes.

(B) Third step → Estimate NDP_FC.

(C) Last step → Estimate NNP_FC.



Final Answer: \[ \boxed{(A), (D), (B), (C)} \] Quick Tip: Income method: Identify firms → classify factor incomes → calculate NDP_FC → adjust for NFIA to get NNP_FC.

Step 1: Recall liquidity concept.

Liquidity = how quickly an asset can be converted into cash without loss of value.

- Highest liquidity → Currency and demand deposits (most liquid).

- Then savings deposits.

- Then time deposits.

- Least liquid → broader aggregates with post office deposits.


Step 2: Order the options.

- (C) Currency + Demand Deposit → Most liquid (M1).

- (A) Currency + Demand + Savings deposits (Post Office) → Next liquid.

- (D) Currency + Demand + Net time deposits (M2/M3).

- (B) Currency + Demand + Net time + Post Office deposits (broadest, least liquid).


Step 3: Correct sequence.

Thus, order is: (C), (A), (D), (B).


Final Answer: \[ \boxed{(C), (A), (D), (B)} \] Quick Tip: Monetary aggregates: \(\textbf{M1 = most liquid (Currency + Demand deposits)}\), while broader measures (M2, M3, M4) are less liquid.

Step 1: Recall the Balance of Payments (BoP) structure.

- Current Account: Includes trade in goods and services, income, and transfers.

- Capital Account: Records cross-border investments such as FDI (Foreign Direct Investment) and portfolio investments.

- Capital Market: Refers to domestic equity and debt markets, not BoP.

- Net Invisibles: Refers to services, remittances, and transfers, not investment in assets.


Step 2: Apply to the question.

Acquiring a steel manufacturing unit abroad is an example of FDI, which is recorded under the Capital Account.



Final Answer: \[ \boxed{Capital Account} \] Quick Tip: FDI and portfolio investments → Capital Account. Goods/services → Current Account.

Step 1: Understand BoP deficit adjustment.

When a country faces a BoP deficit, the central bank uses its official reserves (foreign currency reserves) to finance the gap.


Step 2: Eliminate other options.

- Portfolio investment: Cross-border purchase of financial assets, not reserve use.

- Net Invisibles: Refers to services, remittances, and income flows.

- Net Factor Income: Wages, interest, and profit from abroad.


Step 3: Apply.

Thus, when RBI (or any central bank) sells foreign currency to bridge deficit, it is called Official Reserve Sale.



Final Answer: \[ \boxed{Official Reserve Sale} \] Quick Tip: BoP deficit → Central bank sells foreign exchange reserves → Official Reserve Sale.

Step 1: Recall concept of circular flow of income.

- Injections: Additions to the economy (investment, exports, government spending).

- Leakages: Withdrawals from the economy (savings, taxes, imports).


Step 2: Apply to imports.

When an individual buys foreign goods, money flows out of the domestic economy into another country. This reduces domestic demand and is treated as a leakage.


Step 3: Eliminate wrong options.

- (A) Injection → opposite of leakage.

- (B) Exchange rate market → refers to forex trading.

- (D) Direct investment → cross-border asset acquisition, not imports.



Final Answer: \[ \boxed{Leakages from economy} \] Quick Tip: Imports are leakages; exports are injections in the circular flow of income.

Step 1: Recall effect of increased government expenditure.

- If G rises while T (taxes) remain constant, initially government may run a deficit if G > T.

- Government spending increases planned aggregate expenditure.

- This shifts the aggregate demand (AD) curve upward.

- Finally, this leads to a new equilibrium where output and income are higher.


Step 2: Arrange sequence.

(A) (B) Government runs deficit if G exceeds T.

(B) (A) Rise in planned aggregate expenditure.

(C) (D) Aggregate demand schedule shifts upward.

(D) (C) Equilibrium income increases.



Final Answer: \[ \boxed{(B), (A), (D), (C)} \] Quick Tip: In Keynesian economics: Increase in G → higher planned expenditure → AD shifts upward → higher income/output.

Step 1: Recall sequence of National Income (Product Method).

1. Start with Gross Value of Output (B).

2. Deduct intermediate consumption to get Gross Value Added (A).

3. Deduct depreciation and net indirect taxes (NIT) to get NDP_FC (D).

4. Add Net Factor Income from Abroad (NFIA) to arrive at NNP_FC (C), which is National Income.


Step 2: Arrange in order.

Thus, the sequence is: (B) → (A) → (D) → (C).

Final Answer: \[ \boxed{(B), (A), (D), (C)} \] Quick Tip: National Income (NNP_FC) = Value of Output – Intermediate Cost – Depreciation – NIT + NFIA.

Step 1: Link between output and employment.

Employment in an economy is directly linked with the level of output. When aggregate output rises, producers require more workers; when it falls, employment decreases. Therefore, the determinant of employment is the equilibrium level of output.


Step 2: Role of output equilibrium.

Equilibrium output is established where Aggregate Demand (AD) equals Aggregate Supply (AS). This balance defines how much is produced, which in turn dictates how many workers are hired. If output equilibrium is below full employment level, unemployment exists. If above, inflationary pressures occur.


Step 3: Option-wise evaluation.

- (A) Output Equilibrium: Correct. Employment depends on the equilibrium output where AD = AS.

- (B) Factor of Production: These are inputs, but employment depends on their utilization, not their mere existence.

- (C) Capital Employed: Important for production but not the main determinant of employment.

- (D) Availability of Raw Material: Necessary, but employment is governed by demand-driven output equilibrium.


Step 4: Conclusion.

The level of employment in an economy is determined by the equilibrium level of output, as explained by Keynesian theory.



Final Answer: \[ \boxed{Output Equilibrium} \] Quick Tip: In Keynesian economics, employment depends on \(\textbf{effective demand}\). Thus, equilibrium output (AD = AS) is the key factor that sets the level of employment in an economy.

Step 1: Meaning of full employment.

Full employment does not mean that every single person in the economy has a job. There will always be some level of frictional or voluntary unemployment. Instead, full employment refers to a situation where all available factors of production (land, labour, capital, and entrepreneurship) are fully utilized in the production process.


Step 2: Evaluate the options.

- Option (A): Incorrect, because “everyone got employment” is unrealistic—some natural unemployment will always exist.

- Option (B): Incorrect, because maximum capital investment does not guarantee full employment of all factors.

- Option (C): Correct, as full employment occurs when all factors of production are fully engaged in productive activity.

- Option (D): Incorrect, as excessive demand creates inflationary conditions, not full employment.


Step 3: Conclusion.

Hence, full employment is correctly defined as the state where all factors of production are fully employed.



Final Answer: \[ \boxed{All the factors of production are fully employed in the production process} \] Quick Tip: Remember: Full employment ≠ Zero unemployment. It means optimal use of resources where only frictional and voluntary unemployment exist.

Step 1: Recall Keynesian theory of output.

In Keynesian economics, the actual level of output in the economy is not determined by full employment alone. Instead, it is determined where aggregate demand (AD) equals aggregate income/output (Y). This is called the equilibrium level of output.


Step 2: Evaluate each option.

- Option (A): Full Employment – Wrong. Full employment may not always be achieved; equilibrium can exist even with unemployment.

- Option (B): Excessive Demand – Wrong. This refers to inflationary pressure, not determination of output.

- Option (C): Marginal Output – Wrong. This is not an economic criterion for determining equilibrium output.

- Option (D): Equality of Income (Y) with Aggregate Demand (AD) – Correct. At this point, planned expenditure (AD) matches actual output (Y), defining the equilibrium level of output.


Step 3: Conclusion.

The level of output is determined by the point of equality of AD and Y.



Final Answer: \[ \boxed{Equality of Income (Y) with Aggregate Demand (AD)} \] Quick Tip: Equilibrium output occurs when AD = AS (or AD = Y). If AD < Y, unemployment persists (deficient demand). If AD > Y, inflation arises (excess demand).

Step 1: Recall the concept of full employment output.

Full employment output is the maximum sustainable level of output when all factors of production are fully utilized.

Step 2: When equilibrium output is below full employment.

If the aggregate demand (AD) in the economy is not sufficient to buy the full employment level of output, the actual equilibrium output will be below full employment output. This creates unemployment.

Step 3: Naming the condition.

This situation is termed as deficient demand because demand is insufficient to maintain full employment production.

Step 4: Eliminating wrong options.

- Constant Demand: Incorrect, not an economic term.

- Marginal Demand: Incorrect, irrelevant concept here.

- Aggregate Demand: AD determines equilibrium, but the condition here is “deficient demand.”



Final Answer: \[ \boxed{Deficient Demand} \] Quick Tip: If equilibrium output < full employment output → \(\textbf{Deficient Demand}\).
If equilibrium output > full employment output → \(\textbf{Excess Demand}\).

Step 1: Define excess demand.

Excess demand occurs when aggregate demand (AD) is greater than aggregate supply (AS) at full employment level of output.

Step 2: Implication of excess demand.

Since all factors of production are already fully employed, the economy cannot increase real output further. Instead, the additional demand only causes inflationary pressure (rise in prices).

Step 3: Evaluate the options.

- (A): Incorrect, this is deficient demand.

- (B): Incorrect, equality at full employment does not describe excess demand.

- (C): Correct, because excess demand arises when demand > output at full employment.

- (D): Incorrect, marginal increase is not relevant here.


Step 4: Conclusion.

Thus, excess demand is the situation when demand is more than output available at full employment.


Final Answer: \[ \boxed{Demand is more than output level at full employment level} \] Quick Tip: Remember: - \(\textbf{Deficient demand → Unemployment (AD < AS).}\)
- \(\textbf{Excess demand → Inflation (AD > AS).}\)

Step 1: Recall the definition of GST.

GST is defined as a destination-based consumption tax. This means the tax revenue accrues to the state where the goods or services are consumed, not where they are produced.

Step 2: Differentiate between tax types.

- Destination Based Tax: Tax levied at the place of consumption. This matches GST’s structure.

- Direct Tax: Levied directly on income or wealth (e.g., income tax). GST is not a direct tax.

- Local Tax: Levied by local bodies like municipalities (e.g., property tax). GST is a national-level indirect tax, not local.

- Lump Sum Tax: A fixed tax irrespective of income or output. GST is value-added and not lump sum.


Step 3: Conclusion.

Since GST applies at the place of consumption and is designed as a value-added indirect tax, it is rightly categorized as a destination-based tax.


Final Answer: \[ \boxed{Destination Based Tax} \] Quick Tip: GST is always linked with \(\textbf{destination-based taxation}\). Remember: Producer state loses the tax revenue; consumer state gains it.

Step 1: Recall the meaning of cascading effect.

The cascading effect, also called "tax on tax," occurs when a product is taxed multiple times at different stages of production and distribution, without credit for taxes paid earlier.

Step 2: How GST addresses cascading.

GST removes cascading by introducing the Input Tax Credit (ITC) mechanism. Under ITC, businesses can set off the tax paid on inputs against the tax payable on output, ensuring tax is only paid on the value addition at each stage.

Step 3: Evaluating the options.

- (A) Destination Based Tax: Defines where the tax revenue goes, not about cascading.

- (B) Unified Tax: Refers to integration of multiple taxes, but not directly the reason cascading is removed.

- (C) Input Tax Credit (ITC): Correct. ITC is the mechanism that directly eliminates cascading.

- (D) Unified Market: Refers to integration of states into one market, but not directly about cascading.


Step 4: Conclusion.

The feature that removes cascading effect in GST is the provision of Input Tax Credit.


Final Answer: \[ \boxed{Input Tax Credit (ITC)} \] Quick Tip: Always link "removal of cascading effect" with the \(\textbf{Input Tax Credit (ITC)}\) system under GST.

Step 1: Recall the purpose of GST.

GST subsumed many indirect taxes at both the central and state levels into a single tax system to simplify the tax structure and establish uniformity.

Step 2: Taxes included.

At the central level: Central Excise Duty, Service Tax, Central Sales Tax, and several cesses were merged.

At the state level: VAT/Sales Tax, Octroi, Luxury Tax, Entertainment Tax, and others were subsumed.

Step 3: Evaluate the options.

- (A) All Central taxes: Incorrect. Only indirect central taxes were merged, not all.

- (B) All State taxes: Incorrect. Only certain indirect state taxes were merged.

- (C) Large number of central and state indirect taxes: Correct. This exactly describes GST.

- (D) Large number of central direct taxes: Incorrect. Direct taxes like Income Tax were not included.


Step 4: Conclusion.

GST is the amalgamation of various central and state-level indirect taxes.


Final Answer: \[ \boxed{Large number of central and state indirect taxes} \] Quick Tip: Remember: GST replaced multiple \(\textbf{indirect taxes}\) (excise, VAT, service tax, etc.), but direct taxes (income tax, corporate tax) remain separate.

Step 1: Understanding GST coverage.

GST is designed to subsume a large number of indirect taxes on goods and services into one unified system. However, a few products are kept outside the ambit of GST for revenue and regulatory reasons.

Step 2: Products outside GST.

Alcohol for human consumption, petroleum products (like crude oil, diesel, petrol, ATF, natural gas), and tobacco are notable exclusions from GST. Tobacco, although subject to GST, still attracts additional central excise duty separately, making it effectively outside the full GST framework.

Step 3: Evaluate the options.

- (A) Gold: Covered under GST (though at a special lower rate, 3%).

- (B) Silver: Covered under GST.

- (C) Luxury Consumables: Covered under GST with higher tax rates (e.g., 28% + cess).

- (D) Tobacco: Correct, as it is kept partially outside GST, with excise duty still applicable.



Final Answer: \[ \boxed{Tobacco} \] Quick Tip: Tobacco, alcohol, and petroleum products are the key items not fully under GST; they continue to attract additional duties or remain outside GST ambit.

Step 1: Meaning of unified tax system.

A unified tax system is one where the same tax structure and rates are applied uniformly across all states and regions, removing disparities and complexities.

Step 2: How GST unifies taxes.

Before GST, different states levied different indirect taxes (like VAT, entry tax, octroi, etc.), creating a fragmented tax system. GST replaced these with a single national framework where tax rates and rules are uniform across the country.

Step 3: Evaluate the options.

- (A): Partially correct, as GST combines multiple taxes, but that alone doesn’t make it “unified.”

- (B): Incorrect, because some indirect taxes (like customs duty, excise on tobacco and fuel) still exist.

- (C): Correct, because GST creates uniformity in tax rates nationwide, ensuring one nation–one tax.

- (D): Incorrect, simplicity is a feature, but not the main reason it is unified.


Step 4: Conclusion.

GST is called a unified tax system mainly because it ensures tax uniformity across the country.


Final Answer: \[ \boxed{Because it brought uniformity in tax rate across the country.} \] Quick Tip: GST unifies the country under a common tax system: “One Nation, One Tax, One Market.”