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Tamilnadu Samacheer Kalvi 12th Economics Solutions Chapter 1 Introduction to Macro Economics

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Samacheer Kalvi 12th Economics Introduction to Macro Economics Text Book Back Questions and Answers

Part – A
Multiple Choice Questions

12th Economics 1st Chapter Question Answer Question 1.
The branches of the subject Economics is –
(a) Wealth and welfare
(b) production and consumption
(c) Demand and supply
(d) micro and macro
Answer:
(d) micro and macro

12th Economics Chapter 1 Question 2.
Who coined the word ‘Macro’?
(a) Adam Smith
(b) J M Keynes
(c) Ragnar Frisch
(d) Karl Matrix
Answer:
(c) Ragnar Frisch

12th Economics Chapter 1 Book Back Answers Question 3.
Who is regarded as Father of Modem Macro Economics?
(a) Adam Smith
(b) J M Keynes
(c) Ragnar Frisch
(d) Karl Matrix
Answer:
(b) J M Keynes

12th Economics 1st Chapter Question 4.
Identify the other name for Macro Economics?
(a) Price Theory
(b) Income Theory
(c) Market Theory
(d) Micro Theory
Answer:
(b) Income Theory

12th Economics Samacheer Kalvi Question 5.
Macro economics is a study of –
(a) individuals
(b) firms
(c) a nation
(d) aggregates
Answer:
(d) aggregates

12th Economics 1st Chapter Answer Question 6.
Indicate the contribution of JM Keynes to economics?
(a) Wealth of Nations
(b) General Theory
(c) Capital
(d) Public Finance
Answer:
(b) General Theory

Samacheer Kalvi 12th Economics Question 7.
A steady increase in general price level is termed as –
(a) Wholesale price index
(b) Business Cycle
(c) Inflation
(d) National Income
Answer:
(c) Inflation

Samacheer Kalvi Guru 12th Economics Question 8.
Identify the necessity of Economic policies?
(a) To solve the basic problems
(b) To overcome the obstacles
(c) To achieve growth
(d) All the above
Answer:
(d) All the above

Samacheer Kalvi Economics 12th Question 9.
Indicate the fundamental economic activities of an economy?
(a) Production and Distribution
(b) Production and Exchange
(c) Production and Consumption
(d) Production and Marketing
Answer:
(c) Production and Consumption

12 Economics Samacheer Kalvi Question 10.
An economy consists of –
(a) consumption sector
(b) Production sector
(c) Government sector
(d) All the above
Answer:
(d) All the above

12th Economics Question Answer Question 11.
Identify the economic system where only private ownership of production exists.
(a) Capitalistic Economy
(b) Socialistic Economy
(c) Globalisic Economy
(d) Mixed Economy
Answer:
(a) Capitalistic Economy

12th Economics Lesson 1 Question 12.
Economic system representing equality in distribution is –
(a) Capitalism
(b) Globalism
(c) Mixedism
(d) Socialism
Answer:
(d) Socialism

Samacheer Kalvi 12th Economics Book Question 13.
Who is referred as ‘Father of Capitalism’?
(a) Adam Smith
(b) Karl Marx
(c) Thackeray
(d) JM Keynes
Answer:
(a) Adam Smith

Economic 12th Chapter 1 Question 14.
The country following Capitalism is –
(a) Russia
(b) America
(c) India
(d) China
Answer:
(b) America

12th Economics Answer Pdf Question 15.
Identify The Father of Socialism?
(a) JM Keynes
(b) Karl Marx
(c) Adam Smith
Answer:
(b) Karl Marx

12th Economics 1st Lesson Question And Answer Question 16.
An economic system where the economic activities of a nation are done both by the private and public together is termed as –
(a) Capitalistic Economy
(b) Socialistic Economy
(c) Globalisic Economy
(d) Mixed Economy
Answer:
(b) Socialistic Economy

Economics Samacheer Kalvi Question 17.
Quantity of a commodity accumulated at a point of time is termed as –
(a) production
(b) stock
(c) variable
(d) flow
Answer:
(b) stock

Samacheer Kalvi 12th Economics Solution Book Question 18.
Identify the flow variable?
(a) money supply
(b) assests
(c) income
(d) foreign exchange reserves
Answer:
(c) income

Samacheer Kalvi 12th Economics Book Back Answers Question 19.
Identify the sectors of a Two Sector Model?
(a) Households and Firms
(b) Private and Public
(c) Internal and External
(d) Firms and Government
Answer:
(a) Households and Firms

12th Economics Question And Answer Question 20.
The Circular Flow Model that represents an open Economy?
(a) Two Sector Model
(b) Three Sector Model
(c) Four Sector Model
(d) All the above
Answer:
(c) Four Sector Model

Part – B
Answer The Following Questions In One or Two Sentences.

12th Economics 1st Lesson Question 1.
Define Macro Economics?
Answer:

  1. Macro Economics is the study of the economy as a whole.
  2. In other words, macro economics deals with aggregates such as national income, employment and output.
  3. Macro Economics is also known as ‘Income Theory’.

Economics 12th Class Chapter 1 Question 2.
Define the term ‘Inflation’?
Answer:

  1. Inflation refers to steady increase in general price level.
  2. Estimating the general price level by constructing various price index numbers such as wholesale Price.
  3. Index, Consumer Price Index, etc, are needed.

Samacheer Kalvi Economics Question 3.
What is meant by an ‘Economy’?
Answer:

  1. An economy is referred to any system or area where economic activities are carried out. Each economy has its own character. Accordingly, the functions or activities also vary.
  2. An economy, the fundamental economic activities are production and consumption.

Class 12 Economics Chapter 1 Question 4.
Classify the economies based on status of development?
Answer:
Status of Development:
Developed, underdeveloped, undeveloped and developing economies.

Question 5.
What do you mean by Capitalism?
Answer:

  1. Capitalism, is total freedom and private ownership of means of production.
  2. Capitalistic economy is also termed as a free economy (Laissez faire, in Latin) or market economy where the role of the government is minimum and market determines the economic activities.

Question 6.
Define ‘Economic Model’?
Answer:

  1. A model is a simplified representation of real situation.
  2. Economists use models to describe economic activities, their relationships and their behaviour.
  3. A model is an explanation of how the economy, or part of the economy, works.
  4. Most economic models are built with mathematics, graphs and equations, and attempt to explain relationships between economic variables.

Question 7.
‘Circular Flow of Income’ – Define?
Answer:

  1. The circular flow of income is a model of an economy showing connections between different sectors of an economy.
  2. It shows flows of income, goods and services and factors of production between economic agents such as firms, households, government and nations.
  3. The circular flow analysis is the basis of national accounts and macroeconomics.

Part – C
Answer The Following Questions In One Paragraph.

Question 1.
State the importance of Macro Economics?
Answer:
The importance and the need for introducing a macro outlook of an economy are given below:

  1. There is a need to understand the functioning of the economy at the aggregate level to evolve suitable strategies and to solve the basic problems prevailing in an economy.
  2. Understanding the future problems, needs and challenges of an economy as a whole is important to evolve precautionary measures.
  3. Macro economics provides ample opportunities to use scientific investigation to understand the reality.
  4. Macro economics helps to make meaningful comparison and analysis of economic indicators.
  5. Macro economics helps for better prediction about future and to formulate suitable policies to avoid economic crises, for which Nobel Prize in Economic Sciences is awarded.

Question 2.
Describe the different types of economic systems?
Answer:
There are three major types of economic systems. They are:

1. Capitalistic Economy (Capitalism):

  1. Capitalistic economy is also termed as a free economy (Laissez faire, in Latin) or market economy where the role of the government is minimum and market determines the economic activities.
  2. The means of production in a capitalistic economy are privately owned.
  3. Manufacturers produce goods and services with profit motive.
  4. The private individual has the freedom to undertake any occupation and develop any skill.
  5. The USA, West Germany, Australia and Japan are the best examples for capitalistic economies.
  6.  However, they do undertake large social welfare measures to safeguard the downtrodden people from the market forces.

2. Socialistic Economy (Socialism):

  1. The Father of Socialism is Karl Marx. Socialism refers to a system of total planning, public ownership and state control on economic activities.
  2. Socialism is defined as a way of organizing a society in which major industries are owned and controlled by the government.
  3. A Socialistic economy is also known as ‘Planned Economy’ or ‘Command Economy’.
  4. In a socialistic economy, all the resources are owned and operated by the government.
  5. Public welfare is the main motive behind all economic activities. It aims at equality in the distribution of income and wealth and equal opportunity for all.
  6. Russia, China, Vietnam, Poland and Cuba are the examples of socialist economies. But, now there are no absolutely socialist economies.

3. Mixed Economy (Mixedism):

  1. In a mixed economy system both private and public sectors co-exist and work together towards economic development.
  2. It is a combination of both capitalism and socialism. It tends to eliminate the evils of both capitalism and socialism.
  3. In these economies, resources are owned by individuals and the government.
  4. India, England, France and Brazil are the examples of mixed economy.

Question 3.
Outline the major merits of capitalism?
Answer:
Merits of Capitalism:

  1. Automatic Working:
    Without any government intervention, the economy works automatically.
  2. Efficient Use of Resources:
    All resources are put into optimum use.
  3. Incentives for Hard work:
    Hard work is encouraged and entrepreneurs get more profit for more efficiency.
  4. Economic Progress:
    Production and productivity levels are very high in capitalistic economies.
  5. Consumers Sovereignty:
    All production activities are aimed at satisfying the consumers.
  6. Higher Rates of Capital Formation:
    Increase in saving and investment leads to higher rates of capital formation.
  7. Development of New Technology:
    As profit is aimed at, producers invest on new technology and produce quality goods.

Question 4.
Indicate the demerits of socialism?
Answer:
Demerits of Socialism:
1. Red Tapism and Bureaucracy:
As decision are taken by government agencies, approval of many officials and movement of files from one table to other takes time and leads to red tapism.

2. Absence of Incentive:
The major limitation of socialism is that this system does not provide any incentive for efficiency. Therefore, productivity also suffers.

3. Limited Freedom of Choice:
Consumers do not enjoy freedom of choice over the consumption of goods and services.

4. Concentration of Power:
The State takes all major decisions. The private takes no initiative in making economic decisions. Hence, the State is more powerful and misuse of power can also take place.

Question 5.
Enumerate the features of mixed economy?
Answer:
Features of Mixed Economy:
1. Ownership of Property and Means of Production: The means of production and properties are owned by both private and public. Public and Private have the right to purchase, use or transfer their resources.

2. Coexistence of Public and Private Sectors:
In mixed economies, both private and public sectors coexist. Private industries undertake activities primarily for profit. Public sector firms are owned by the government with a view to maximize social welfare.

3. Economic Planning:
The central planning authority prepares the economic plans. National plans are drawn up by the Government and both private and public sectors abide. In general, all sectors of the economy function according to the objectives, priorities and targets laid down in the plan.

4. Solution to Economic Problems:
The basic problems of what to produce, how to produce, for whom to produce and how to distribute are solved through the price mechanism as well as state intervention.

5. Freedom and Control:
Though private has freedom to own resources, produce goods and ‘ services and distribute the same, the overall control on the economic activities rests with
the government.

Question 6.
Distinguish between Capitalism and Globalism?
Answer:
Capitalism:
The system where the means of production are privately owned and market determines the economic activities.

Globalism:
An economic system where the economic activities of a nation are inter connected and inter dependent on each other nation.

Question 7.
Briefly explain the two sector circular flow model?
Answer:
Circular Flow of Income in a Two-Sector Economy:
There are only two sectors namely, household sector and firm sector.

1. Household Sector:

  1. The household sector is the sole buyer of goods and services, and the sole supplier of factors of production, i.e., land, labour, capital and organisation.
  2. It spends its entire income on the purchase of goods and services produced by the business sector.
  3. The household sector receives income from firm sector by providing the factors of production owned by it.

2. Firms:

  1. The firm sector generates its revenue by selling goods and services to the household sector.
  2. It hires the factors of production, i.e., land, labour, capital and organisation, owned by the household sector.
  3. The firm sector sells the entire output to households.
  4. In a two – sector economy, production and sales are equal and there will be a circular flow of income and goods.
  5. The outer circle represents real flow (factors and goods) and the inner circle represents the monetary flow (factor prices and commodity prices).
  6. Real flow indicates the factor services flow from household sector to the business sector, and goods and services flow from business sector to the household.
  7. The basic identities of the two-sector economy are as under:

Y = C + 1
Where
Y is Income; C is Consumption; I is investment.

Part – D
Answer The Following Questions In One Page.

Question 1.
Discuss the scope of Macro Economics?
Answer:
The study of macro economics has wide scope and it covers the major areas as follows:
1. National Income:
Measurement of national income and its composition by sectors are the basic aspects of macroeconomic analysis. The trends in National Income and its composition provide a long term understanding of the growth process of an economy.

2. Inflation:
It refers to steady increase in general price level. Estimating the general price level by constructing various price index numbers such as Wholesale Price Index, Consumer Price Index, etc, are needed.

3. Business Cycle:
Almost all economies face the problem of business fluctuations and business cycle. The cyclical movements (boom, recession, depression and recovery) in the economy need to be carefully studied based on aggregate economic variables.

4. Poverty and Unemployment:
The major problems of most resource – rich nations are poverty and unemployment. This is one of the economic paradoxes. A clear understanding about the magnitude of poverty and unemployment facilitates allocation of resources and initiating corrective measures.

5. Economic Growth:
The growth and development of an economy and the factors determining them could be understood only through macro analysis.

6. Economic Policies:
Macro Economics is significant for evolving suitable economic policies. Economic policies are necessary to solve the basic problems, to overcome the obstacles and to achieve growth.

Question 2.
Illustrate the functioning of an economy based on its activities?
Answer:
An economy is referred to any system or area where economic activities are carried out. Each economy has its own character. Accordingly, the functions or activities also vary. The functioning of an economy by its activities is explained in flow chart.

  1. In an economy, the fundamental economic activities are production and consumption.
  2. These two activities are supported by several other activities.
  3. The ultimate aim of these activities is to achieve growth. The ‘exchange activity’ supports the production and consumption activities. These activities are influenced by several economic and non – economic activities.
  4. The major economic activities include transportation, banking, advertising, planning, government policy and others.
  5. The major non – economic activities are environment, health, education, entertainment, governance, regulations etc.
  6. In addition to these supporting activities, external activities from other economies such as import, export, international relations, emigration, immigration, foreign investment, foreign exchange earnings, etc. also influence the entire functioning of the economy.

12th Economics 1st Chapter Question Answer Introduction To Macro Economics Samacheer Kalvi

Question 3.
Compare the features of capitalism and socialism?
Answer:
Features of Capitalistic Economy:
1. Private Ownership of Property and Law of Inheritance:
The basic feature of capitalism is that all resources namely, land, capital, machines, mines etc. are owned by private individuals. The owner has the right to own, keep, sell or use these resources according to his will. The property can be transferred to heirs after death.

2. Freedom of Choice and Enterprise:
Each individual is free to carry out any occupation or trade at any place and produce any commodity. Similarly, consumers are free to buy any commodity as
per their choice.

3. Profit Motive:
Profit is the driving force behind all economic activities in a capitalistic economy. Each individual organization produce only those goods which ensure high profit. Advance technology, division of labour, and specialisation are followed. The golden rule for a producer under capitalism is ‘to maximize profit.’

4. Free Competition:
There is free competition in both product and factor market. The government or any authority cannot prevent firms from buying or selling in the market. There is competition between buyers and sellers.

5. Price Mechanism:
Price mechanism is the heart of any capitalistic economy. All economic activities are regulated through price mechanism i.e., market forces of demand and supply.

6. Role of Government:
As the price mechanism regulates economic activity, the government has a limited role in a capitalistic economy. The government provides basic services such as, defense, public health, education, etc.

7. Inequalities of Income:
A capitalist society is divided into two classes – ‘haves’ that is those who own property and ‘have-nots’ who do not own property and work for their living. The outcome of this situation is that the rich become richer and poor become poorer. Here, economic inequality goes on increasing.

Features of Socialism:

1. Public Ownership of Means of Production:
All resources are owned by the government. It means that all the factors of production are nationalized and managed by the public authority.

2. Central Planning:
Planning is an integral part of a socialistic economy. In this system, all decisions are undertaken by the central planning authority.

3. Maximum Social Benefit:
Social welfare is the guiding principle behind all economic activities. Investments are planned in such a way that the benefits are distributed to the society at large.

4. Non – existence of Competition:
Under the socialist economic system there is absence of competition in the market. The state has full control over production and distribution of goods and services. The consumers will have a limited choice.

5. Absence of Price Mechanism:
The pricing system works under the control and regulation of the central planning authority.

6. Equality of Income:
Another essential feature of socialism is the removal and reduction of economic inequalities. Under socialism private property and the law of inheritance do not exist.

7. Equality of Opportunity:
Socialism provides equal opportunity for all through free health, education and professional training.

8. Classless Society:
Under socialism, there is a classless society and so no class conflicts. In a true socialist society, everyone is equal as far as economic status is concerned.

Question 4.
Compare the feature among Capitalism, Secularism and Mixedism?
Answer:
12th Economics Chapter 1 Introduction To Macro Economics Samacheer Kalvi

Samacheer Kalvi 12th Economics Introduction to Macro Economics Addtional Questions and Answers

Part – A
I. Multiple Choice Questions.

Question 1.
John Maynard Keynes book “The General theory of Employment, Interest and Money” was published in –
(a) 1936
(b) 1946
(c) 1956
(d) 1966
Answer:
(a) 1936

Question 2.
The word ‘Macro’ is derived from the Greek word –
(a) Makros
(b) Macros
(c) Macrow
(d) Mac
Answer:
(a) Makros

Question 3.
………………….. is the driving force behind all economic activities in a capitalistic economy.
(a) Benefit
(b) Additional
(c) Profit
(d) Loss
Answer:
(c) Profit

Question 4.
Capitalism and Socialism are two extreme and ……………………… approaches.
(a) normal
(b) opposite
(c) upward
(d) downward
Answer:
(b) opposite

Question 5.
Capitalist Economy is also termed as a Economy.
(a) Free
(b) Costly
(c) Value
(d) Govt
Answer:
(a) Free

Question 6.
The USA, West Germany, Australia and Japan are the best examples for economies.
(a) Socialistic
(b) Capitalistic
(c) Mixed
(d) Profit
Answer:
(b) Capitalistic

Question 7.
In a ……………………… Economy, all the resources are owned and operated by the government.
(a) Capitalistic
(b) Globalistic
(c) Socialistic
(d) Mixed
Answer:
(c) Socialistic

Question 8.
…………………… are planned in such a way that the benefits are distributed to the society at large.
(a) Investment
(b) Production
(c) Distribution
(d) Services
Answer:
(a) Investment

Question 9.
Who promotes balanced growth of the economy?
(a) Capitalism
(b) Socialism
(c) Globalism
(d) Mixedism
Answer:
(d) Mixedism

Question 10.
In …………………….. economies both private and public sectors coexist.
(a) Capitalism
(b) Socialism
(c) Globalism
(d) Mixed
Answer:
(d) Mixed

Question 11.
…………………….. is considered as the Father of socialism.
(a) Adam Smith
(b) Keynes
(c) Karlmarx
(d) Marshall
Answer:
(c) Karlmarx

Question 12.
…………………………. is another name for economics.
(a) Political economy
(b) Socialist economy
(c) Capitalist economy
(d) Planned economy
Answer:
(a) Political economy

Question 13.
The socialist economy is also known as economy.
(a) Market
(b) Common
(c) Traditional
(d) Mixed
Answer:
(b) Common

Question 14.
Economics is a ……………………. science.
(a) Political
(b) Social
(c) Physical
(d) Natural
Answer:
(b) Social

Question 15.
In a ………………….. Economy there is no central co – ordinator.
(a) Mixed
(b) Capitalist
(c) Socialist
(d) Traditional
Answer:
(b) Capitalist

Question 16.
In a socialist economy, all decisions regarding production and distribution are taken by
(a) market forces
(b) central planning authority
(c) customs and traditions
(d) private sector
Answer:
(b) central planning authority

Question 17.
Co – existence of public and private sector is called economy.
(a) Mixed
(b) Socialist
(c) Capitalist
(d) Traditional
Answer:
(a) Mixed

Question 18.
The government has minimum role in …………………….. economy.
(a) Mixed
(b) Capitalist
(c) Socialist
(d) Traditional
Answer:
(b) Capitalist

Question 19.
Economic planning is an important feature of …………………… Economy.
(a) Mixed
(b) Capitalism
(c) Socialism
(d) Traditional
Answer:
(a) Mixed

Question 20.
Welfare is ignored in ……………………….. Economy.
(a) Mixidism
(b) Socialistic
(c) Capitalistic
(d) Traditional
Answer:
(c) Capitalistic

Question 21.
Free trade economy is otherwise called ……………………….. economy.
(a) Socialist
(b) Capitalist
(c) Traditionalist
(d) Mixidist
Answer:
(b) Capitalist

Question 22.
Extreme inequality is prevented in ……………………… system.
(a) Socialist
(b) Capitalist
(c) Mixidist
(d) Traditionalist
Answer:
(a) Socialist

Question 23.
Market forces have only a limited role to play in ………………………. economy.
(a) Mixidist
(b) Socialist
(c) Capitalist
(d) Traditionalist
Answer:
(b) Socialist

Question 24.
India is the best example for …………………………. economy.
(a) Capitalism
(b) Socialism
(c) Mixedism
(d) Traditionalism
Answer:
(c) Mixedism

Question 25.
What is main motive of capitalism?
(a) Profit
(b) Benefit
(c) Excess money
(d) Loss
Answer:
(a) Profit

II. Match the following and choose the correct answer by using codes given below

Question 1.
A. Father of Capitalism – (i) Adam Smith
B. Father of Socialism – (ii) Karl Marx
C. Net Economic Welfare – (iii) Samuelson
D. Father of Macro Economics – (iv) J.M. Keynes
Codes:
(a) A (i) B (ii) C (iii) D (iv)
(b) A (ii) B (iii) C (iv) D (i)
(c) A (iii) B (iv) C (ii) D (i)
(d) A (iv) B (iii) C (ii) D(i)
Answer:
(a) A (i) B (ii) C (iii) D (iv)

Question 2.
A. Mixed Economy – (i) Welfare Oriented
B. Socialist Economy – (ii) Subsistence Economy
C. Capitalist Economics – (iii) Economic Planning
D. Traditional Economy – (iv) Profit Motive
Codes:
(a) A (i) B (ii) C (iii) D (iv)
(b) A (ii) B (iii) C (iv) D (i)
(c) A (iii) B (i) C (iv) D (ii)
(d) A (iv) B (iii) C (ii) D (i)
Answer:
(c) A (iii) B (i) C (iv) D (ii)

Question 3.
A. Minimum Role of Government – (i) Freedom of choice
B. Absence of monopoly – (ii) Capitalism
C. Capitalist Economy – (iii) Socialism
D. Socialist Economy – (iv) Central planning
Codes:
(a) A (i) B (ii) C (iii) D (iv)
(b) A (ii) B (iii) C (iv) D (i)
(c) A (iii) B (i) C (iv) D (ii)
(d) A (ii) B (i) C (iii) D (iv)
Answer:
(b) A (ii) B (iii) C (i) D (iv)

Question 4.
A. Traditional Economy – (i) Socialism
B. Minimum Role of Government – (ii) Traditions and customs
C. Absence of Monopoly – (iii) Capitalism
D. Administered prices – (iv) Mixed Economy
Codes:
(a) A (i) B (ii) C (iii) D (iv)
(b) A (iv) B (iii) C (ii) D(i)
(c) A (ii) B (iii) C (i) D (iv)
(d) A (ii) B (iv) C (iii) D(i)
Answer:
(c) A (ii) B (iii) C (i) D (iv)

Question 5.
A. Private property – (i) Capitalist Economy
B. Bureaucratic expansion – (ii) Laissez Faire Economy
C. Market Economy – (iii) Socialism
D. Socialism – (iv) China and Cubs
Codes:
(a) A (i) B (ii) C (iii) D (iv)
(b) A (iv) B (iii) C (ii) D (i)
(c) A (ii) B (iii) C (i) D (iv)
(d) A (i) B (iii) C (ii) D (iv)
Answer:
(c) A (ii) B (iii) C (i) D (iv)

III. State whether the statements are true or false.

Question 1.
(i) In Mixed Economy, both public and private sector co-existence.
(ii) Mixed Economy followed by India.

(a) Both (i) and (ii) are true
(b) Both (0 and (ii) are false
(c) (i) is true but (ii) is false
(d) (i) is false but (ii) is true
Answer:
(a) Both (i) and (ii) are true

Question 2.
(i) Profit Motive of Capitalist Economy.
(ii) Basic problems are solved by customs and traditions.

(a) Both (i) and (ii) are true
(b) Both (i) and (ii) is false
(c) (i) is true but (ii) is false
(d) (i) is false but (ii) is true
Answer:
(i) is true but (ii) is false

Question 3.
(i) Father of Macro Economics – Adam Smith.
(ii) Father of Capitalism – Adam Smith

(a) Both (i) and (ii) are true
(b) Both (i) and (ii) are false
(c) (i) is true but (ii) is false
(d) (i) is false but (ii) is true
Answer:
(a) Both (i) and (ii) are true

Question 4.
(i) The Father of Socialism is Karl Marx.
(ii) Socialism is Profit Motive.

(a) Both (i) and (ii) are true
(b) Both (i) and (ii) are false
(c) (i) is true but (ii) is false
(d) (i) is false but (ii) is true
Answer:
(i) is true but (ii) is false

Question 5.
(i) Capitalism and Socialism are same approaches.
(ii) Capitalism and Socialism are two extreme and opposite approaches.

(a) Both (i) and (ii) are true
(b) Both (i) and (ii) are false
(c) (i) is true but (ii) is false
(d) (i) is false but (ii) is true
Answer:
(i) is false but (ii) is true

IV. Which of the following is correctly matched:

Question 1.
(a) One Sector Model – firm
(b) Two Sector Model – firm, government
(c) Three Sector Model – firm, household, government
(d) Four Sector Model – firm, household, government Industry
Answer:
(c) Three Sector Model – firm, household, government

Question 2.
(a) Capitalist Economy – USA, West Germany, Australia
(b) Socialist Economy – Japan, USSR
(c) Mixed Economy – Russia, Cuba
(d) Traditional Economy – India, China
Answer:
(a) Capitalist Economy – USA, West Germany, Australia

Question 3.
(a) Capitalism – Marshall
(b) Socialism – Karl Marx
(c) Mixidism – Adam Smith
(d) Traditionalism – Samuelson
Answer:
(b) Socialism – Karl Marx

Question 4.
(a) Macro – Greek word – Makros
(b) Macro – Latin word – Maker
(c) Macro – French word – Macro
(d) Macro – English word – Large
Answer:
(a) Macro – Greek word – Makros

Question 5.
(a) The first Noble Prize in Economic Science – Ragnar Frisch
(b) The General Theory of Employment – Adam Smith
(c) Planned Economy – J.M. Keynes
(d) Free Economy – Karl Marx
Answer:
(a) The first Noble Prize in Economic Science – Ragnar Frisch

V. Which of the following is not correctly matched:

Question 1.
(a) Equal opportunity – Mixidism
(b) Profit Motive – Capitalism
(c) Social Benefit – Socialism
(d) Traditional – Traditionalism
Answer:
(a) Equal opportunity – Mixidism

Question 2.
(a) Micro – small
(b) Macro – large
(c) Micro – very very small
(d) Macro – makros
Answer:
(c) Micro – very very small

Question 3.
(a) Traditional Economy – Subsistence Economy
(b) Economics is a – social science
(c) Economics other name – Political Economy
(d) Consumers Enjoy – Socialism
Answer:
(d) Consumers Enjoy – Socialism

Question 4.
(a) Private ownership – Capitalism
(b) Public ownership – Socialism
(c) Ownership of property – Mixidism
(d) Social welfare – Traditionalism
Answer:
(d) Social welfare – Traditionalism

Question 5.
(a) Traditional Government Involvement only
(b) Capatalist – Internal Regulation only
(c) Socilaistic – Complete Involvement
(d) Mixodistic – Limited Role Answers
Answer:
(a) Traditional Government Involvement only

VI. Pick the odd one out.

Question 1.
(a) Rapid Economic growth
(b) Balanced Economic growth
(c) Economic Equality
(d) Ineffeciency
Answer:
(d) Ineffeciency

Question 2.
(a) Public ownership
(b) Central planning
(c) Price Mechanism
(d) Maximum Social Benefit
Answer:
(c) Price Mechanism

Question 3.
(a) Households
(b) Firms
(c) Government
(d) Factories
Answer:
(d) Factories

Question 4.
(a) National Income
(b) Inflation
(c) Business cycle
(d) Non – Economic factor
Answer:
(d) Non – Economic factor

Question 5.
(a) Capitalism
(b) Socialism
(c) Globalism
(d) Mixidism
Answer:
(c) Globalism

VII. Assertion and Reason.

Question 1.
Assertion (A): Macro Economics is the study of the economy as a whole.
Reason (R): Macro Economics is also known as “Income theory”.

(a) Both ‘A’ and ‘R’ are true and ‘R’ is the correct explanation to ‘A’
(b) Both ‘A’ and ‘R’ are true but ‘R’ is not the correct explanation to ‘A’
(c) ‘A’ is true but ‘R’ is false
(d) ‘A’ is false but ‘R’ is true
Answer:
(a) Both ‘A’ and ‘R’ are true and ‘R’ is the correct explanation to ‘A’

Question 2.
Assertion (A): Inflation refers to steady increase in general price level.
Reason (R): Deflation refers to steady increase in general price level.

(a) Both ‘A’ and ‘R’ are true and ‘R’ is the correct explanation to ‘A’
(b) Both‘A’ and ‘R’ are true but ‘R’ is not the correct explanation to ‘A’
(c) ‘A’ is true but ‘R’ is false
(d) ‘A’ is false but ‘R’ is true
Answer:
(c) ‘A’ is true but ‘R’ is false

Question 3.
Assertion (A):
The major economic activities include transportation, banking, advertising.
Reason (R): The major economic activities include only Industrial development.

(a) Both ‘A’ and ‘R’ are true and ‘R’ is the correct explanation to ‘A’
(b) Both ‘A’ and ‘R’ are true but ‘R’ is not the correct explanation to ‘A’
(c) ‘A’ is true but ‘R’ is false
(d) ‘A’ is false but ‘R’ is true
Answer:
(b) Both ‘A’ and ‘R’ are true but ‘R’ is not the correct explanation to ‘A’

Question 4.
Assertion (A): Capitalistic Economy is Social Welfare Economy.
Reason (R): Capitalistic Economy is also free Economy or market Economy.

(a) Both ‘A’ and ‘R’ are true and ‘R’ is the correct explanation to ‘A’
(b) Both ‘A’ and ‘R’ are true but ‘R’ is not the correct explanation to ‘A’
(c) ‘A’ is true but ‘R’ is false
(d) ‘A’ is false but ‘R’ is true
Answer:
(d) ‘A’ is false but ‘R’ is true

PART – B
Answer The Following Questions In One or Two Sentences.

Question 1.
Define Globalism?
Answer:
Globalism:
The term coined by Manfred D Steger (2002) to denote the new market ideology of globalisation that connects nations together through international trade and aiming at global development. This ideology is also termed as ‘Extended Capitalism’.

Question 2.
Define Mixed Economy (or) Mixedism?
Answer:

  1. In a mixed economy system both private and public sectors co – exist and work together towards economic development.
  2. It is a combination of both capitalism and socialism. It tends to eliminate the evils of both capitalism and socialism.
  3. In these economies, resources are owned by individuals and the government. India, England, France and Brazil are the examples of mixed economy.

Question 3.
What is meant by Four Sector Economy?
Answer:

  • In a Four – sector economy, in addition to household, firms and government, a fourth sector namely, external sector is included.
  • In real life, only four – sector economy exists. This model is composed of four sectors namely,
    • Households
    • Firms
    • Government
    • External sector
  • In four – sector economy, expenditure for the entire economy include domestic expenditure (C + I + G) and net exports (X – M).

Question 4.
Define Profit Motive?
Answer:
Profit Motive:
Profit is the driving force behind all economic activities in a capitalistic economy. Each individual and organization produce only those goods which ensure high profit. Advance technology, division of labour, and specialisation are followed. The golden rule for a producer under capitalism is ‘to maximize profit. ’

PART – C
Answer The Following Questions In One Paragraph.

Question 1.
Discuss the limitations of Macro Economics?
Answer:
Macro economics suffers from certain limitations. They are:

  1. There is a danger of excessive generalisation of the economy as a whole.
  2. It assumes homogeneity among the individual units.
  3. There is a fallacy of composition. What is good of an individual need not be good for nation and vice versa. And, what is good for a country is not good for another country and at another time.
  4. Many non – economic factors determine economic activities; but they do not find place in the usual macroeconomic books.

Question 2.
Outline the Major Demerits of Capitalism?
Answer:

  1. Concentration of Wealth and Income:
    Capitalism causes concentration of wealth and income in a few hands and thereby increases inequalities of income.
  2. Wastage of Resources:
    Large amount of resources are wasted on competitive advertising and duplication of products.
  3. Class Struggle:
    Capitalism leads to class struggle as it divides the society into capitalists and workers.
  4. Business Cycle:
    Free market system leads to frequent violent economic fluctuations and crises.
  5. Production of non essential goods:
    Even the harmful goods are produced if there is possibility to make profit.

Question 3.
Indicates the Merits of Socialism?
Answer:

  1. Reduction in Inequalities:
    No one is allowed to own and use private property to exploit others.
  2. Rational Allocation of Resources:
    The central planning authority allocates the resources in a planned manner. Wastages are minimised and investments are made in a pre planned manner.
  3. Absence of Class Conflicts:
    As inequalities are minimum, there is no conflict between rich and poor class. Society functions in a harmonious manner.
  4. End of Trade Cycles:
    Planning authority takes control over production and distribution of goods and services. Therefore, economic fluctuations can be avoided.
  5. Promotes Social Welfare:
    Absence of exploitation, reduction in economic inequalities, avoidance of trade cycles and increase in productive efficiency help to promote social welfare.

PART – D
Answer The Following Questions In One Page.

Question 1.
State the Merits and Demerits of Mixed Economy?
Answer:
Merits of Mixed Economy:

1. Rapid Economic Growth:
The best advantage of mixed economy is that it promotes rapid economic growth. Thus, both public requirements and private needs are taken care of.

2. Balanced Economic Growth:
Mixedism promotes balanced growth of the economy. It promotes balanced growth between agriculture and industry, consumer goods and capital goods, rural and urban etc.

3. Proper Utilization of Resources:
In a mixed economy, the government can ensure proper utilization of resources. The government controls most of the important activities directly and the private sector indirectly.

4. Economic Equality:
The government uses progressive rates of taxation for levying income tax to bring about economic equality.

5. Special Advantages to the Society:
The government safeguards the interest of the workers and weaker sections by legislating on minimum wages, and rationing, establishing fair price shops and formulating social welfare measures.

Demerits of Mixed Economy

1. Lack of Coordination:
The greatest drawback of mixedism is lack of coordination between public sector and private sector. As both work with divergent motives, it creates many coordination related problems.

2. Competitive Attitude:
It is expected that both government and private should work with a complementary spirit towards the welfare of the society, but in reality they are competitive in their activities.

3. Inefficiency:
Most of the public sector enterprises remain inefficient due to lethargic bureaucracy, red tapism and lack of motivation.

4. Fear of Nationalization:
In a mixed economy, the fear of nationalization discourages the private entrepreneurs in their business operations and innovative initiatives.

5. Widening Inequality:
Ownership of resources, laws of inheritance and profit motive of people widens the gap between rich and poor. Ultimately the inequality of capitalism and inefficiency of socialism are found in mixed economies.

Question 2.
Classify the concepts of Macro Economics?
Answer:
The important concepts used in macro economics are presented below:

Stock and Flow Variables:
Variables used in economic analysis are classified as stock and flow. Both stock and flow variables may increase or decrease with time.

1. Stock refers to a quantity of a commodity measured at a point of time. In macro economics, money supply, unemployment level, foreign exchange reserves, capital etc are examples of stock variables.

2. Flow variables are measured over a period of time. National Income, imports, exports, consumption, production, investment etc are examples of flow variables.

3. Economic Models A model is a simplified representation of real situation. Economists use models to describe economic activities, their relationships and their behaviour. A model is an explanation of how the economy, or part of the economy, works. Most economic models are built with mathematics, graphs and equations, and attempt to explain relationships between economic variables. The commonly used economic models are the supply-demand models and circular flow models and Smith models.

Question 3.
Briefly explain circular flow of Income in a Three Sector Economy?
Answer:
Circular Flow of Income in a Three-Sector Economy:
Samacheer Kalvi 12th Economics Chapter 1 Introduction to Macro Economics Textbook Exercise Questions and Answers img 6

  • In addition to household and firms, inclusion of the government sector makes this model a three-sector model.
  • The government levies taxes on households and firms, purchases goods and services from firms, and receive factors of production from household sector.
  • On the other hand, the government also makes social transfers such as pension, relief, subsidies to the households.
  • Similarly, Government pays the firms for the purchases of goods and services. The Flow Chart illustrates three-sector economy model:
  • Under three sector model, national income (Y) is obtained by adding Consumption expenditure (C), Investment expenditure (I) and Government expenditure (G).
  • Therefore: Y = C + I + G.

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