Economics

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“Economics Interview Questions and Answers Guide will explain us now that Economics is the social science that studies the production, distribution, and consumption of goods and services. Economics Interview Questions and Answers are for your preparation of Economics jobs. Current economic models developed out of the broader field of political economy in the late 19th century. Learn more about the basic and advance Economics by our Economics Interview Questions and Answers Guide.”



115 Economics Questions And Answers

81⟩ What is the role of Indian government in Indian economy?

Keynesian (John Keynes) economics is all about using monetary and fiscal (Government) policies to help direct the market towards equilibrium. Keynes did not believe that the market was self-correcting, and thus required government involvement. Keynesian economics also uses the view that prices are constant in the short term and only adjust in the long term (sticky price theorem). This delay in price adjustment pulls the market away from equilibrium.

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82⟩ What is meant by the term National Debt?

When a government spends more than it receives in taxes, it runs a budget deficit, which is usually covered by issuing debt obligations to domestic and/or international investors. In the US, these obligations are Treasury bills, Treasury notes, and Treasury bonds. The total outstanding amount of such obligations constitutes a National Debt.

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84⟩ What is Ricardos Theory?

Briefly, the price of anything is based on comparative advantage. If Adam produces clocks better and cheaper than Bill, all clock production should go to Adam.

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85⟩ What is meaning of market economy?

The meaning of a market economy is in which the decision and production are made. The consumption of goods services are based on voluntary exchange in markets.

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86⟩ What is pricing of Factors of Production?

Whenever we have touched on the pricing of productive factors, we have signified the prices of their unit services, i.e., their rents. In order to set aside consideration of the pricing of the factors as "wholes," as embodiments of a series of future unit services, we have been assuming that no businessmen purchase factors (whether land, labor, or capital goods) outright, but only unit services of these factors. This assumption will be continued for the time being. Later on, we shall drop this restrictive assumption and consider the pricing of "whole factors."

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87⟩ What is consumption?

"Consumption" is an old name for tuberculosis (TB) that describes how the illness wastes away or consumes its victims. TB is "an ancient enemy" that has plagued humankind for more than five thousand years.

It can also mean to "consume", consumption of food or resources.

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88⟩ What is BOP?

It is called as Balance of payments - an economic term. (BOP) measures the payments that flow between any individual country and all other countries. It is used to summarize all international economic transactions for that country during a specific time, usually a year. The BOP is determined by the country's exports and imports of goods, services, and financial capital, as well as financial transfers. It reflects all payments and liabilities to foreigners (debits) and all payments and obligations received from foreigners (credits).

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91⟩ What is the incidence of tax?

Well tax incidence refers to who actually pays the tax.

Tax incidence can be divided into-

1. Formal incidence: the party liable to the tax

2. Informal incidence: party, who actually pays the tax

The tax incidence is decided by the elasticity of demand and supply for a good or service.

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92⟩ Is it true that government revenues are increased because of lower tax rates?

It is true to a point. The Laffer curve shows that revenues increase as the tax rates rise (0 tax rate = 0 revenue) up to a point, but the increase slows as the rate rises higher and at some point total revenue begins to decline. If your incremental tax rate is 1% and you can work 4 hours to make $100, you will get to keep $99 and most people would be willing to do this. You would probably will to work the extra hours if you were taxed 5 or 10%. However, if you were subject to an incremental rate of 99%, you would not work that long knowing the government was only going to let you keep $1. The "magic number" seems to be somewhere around 15-20%. If the rates are above this, people are not motivated to increase their earnings. Big corporations react the same way.

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93⟩ What is inflation and how is it measured?

Inflation means an overall increase in the prices of goods and services. It is a decrease in the value of a currency. There are three types of measurement, Core Inflation, CPI, and WPI. Core Inflation is a measurement of non-volatile goods such as food and non-precious metals. It leaves out goods like oil because oil's price is subject to wild fluctuations. CPI is the most common measurement, using a market basket of goods and measuring their price from a point in the past (a CPI of 100 is arbitrarily the same price level for 1982-1984). Thus, the equation is (Price of most recent market basket/price of same market basket in 1982-1984) X 100. The 100 is to give us the number we normally see. WPI is Wholesale Price Index. It is a measure of wholesaler's prices and is generally considered a pre-cursor to what CPI will be (as it takes time for goods to read the consumer).

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94⟩ How is education an investment in human capital?

Well, the idea of humans as capital means that humans have a certain worth to a company (or society). Education increases that worth, making individuals more able to contribute to a company (or to society). Therefore, investing in Education... in your employees, for instance, is worthwhile because then your employees increase their value to you, as an employer. In a general sense, society's investment in educational programs increases people's value to society in general.

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98⟩ What does it mean when a rupee appreciate?

I think the answer to this question lies in the reasons, which are contributing to the rise and fall of a price of any commodity. India has now good amount of dollars and as such, demand of dollars has come down comparatively.

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99⟩ What is trickle down economics?

A derogatory term applied to Reaganomics, or supply-side economics, trickle-down economics is the theory that tax cuts for the wealthy merely "trickled down" to the bottom groups and that the rich benefited at the expense of the economy. Similar criticisms were raised about the supply-side tax cuts enacted by Treasury Secretary Andrew Mellon in 1921 but not for those made by John Kennedy in the 1960s. Supply-side cuts involve cutting taxes across the board but most dramatically for those in the top tax brackets. The rationale was that those who paid the most taxes would then be able to reinvest their tax "savings." Thus, supporters have countered the phrase "trickle-down" with the one coined by John Kennedy: "a rising tide lifts all boats."

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