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Nilanjan Bhowmick AIR 3, CSIR NET (Earth Science)
- UGC NET
- Economics
51. when an economy is at full employment, which of the following will tost likely create demand pull inflation in the short run ? (1 an increase in discount ra
51. When an economy is at full employment, which of the following will Tost likely create demand pull inflation in the short run ? (1 An increase in discount rate (2] (3) (4) Both 1 and 2 A decrease in real rate of interest A decrease in government spending (1) ar (3) 7Rr a (4) 1 g 2 dt Which of the following National Income ldentities is NOT Correct ? (1) (2) NNPMP GNPM- Depreciation (3) (4) 52. NNPP NNPME (Indirect Taxea+Subsşidies) NNP GNP- Depreciation Indirect Taxes + Subsidis All are correct (1) 7.T.9 A.IL.t (HqH 277+ (2) .7. .gT.E TH (3) T.T.T. - t.g.T q FT - AT
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Nidhi taparia
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The correct answer is option number (2). Let's approach all the other options to find out why. Number (1) - Discount rate is what we commonly know as the bank rate. If the apex bank, say RBI increases this rate it will make loans dearer and money supply in the economy contracts. Number (3) - If govt spending reduces, AD curve shifts downward. This will not lead to inflation. Number (4) - ruled out because 1 is out already. This leaves us with only Option (2). If real interest rate goes down, credit and money supply expand. Consequently there is much more money in the market now, demands rise. Given full employment, this causes demand pull inflation.
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Nidhi taparia
The correct answer of question 52 is option (1). It is incorrect because the negative sign outside indirect taxes and subsidies would mean both components are bein subtracted. That's never the case, whether we move from Market Price to Factor Cost or vice versa.