2019 NABTEB GCE Advance Economics Questions and Answers

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NABTEB GCE Advance Economics Questions and Answers









location of industries is sitting an industry in a particular place with the motive of reducing cost of production whiles localization in contrast, refers to the efforts of a company to tailor their products towards a certain region. For example, changing the language on their product for a mainly Spanish speaking area, or appealing to the culture or values in a specific area. This allows a company that is based in, say New York, to target their products towards people in California, or Mississippi, or overseas.

[Pick Any Two]
(i) Infrastructure Economies of Scale
(ii) Specialization Economies of Scale
(iii) Innovation Economies of Scale
(iv) Lobbying Economies of Scale

A balanced budget is a situation in financial planning or the budgeting process where total revenues are equal to or greater than total expenses. A budget can be considered balanced in hindsight after a full year’s worth of revenues and expenses have been incurred and recorded. A company’s operating budget for an upcoming year can also be called balanced based on predictions or estimates.

(i) Economic growth: To promote rapid and balanced economic growth so as to improve living standard of the people.
(ii) Reduction of poverty and unemployment: To eradicate mass poverty and unemployment by creating employment opportunities and providing maximum social benefits to the poor.
(iii) Reduction of inequalities: Inequalities of income and wealth are reduced through levying taxes and granting subsidies. Government levies high rate of tax on rich people and lower rate in the lower income group and also provides the latter with subsidies and amenities. Economic progress in itself is not a sufficient goal but the goal must be equitable progress.
(iii) Reallocation of resources: The reallocation of resources is necessary in order to achieve social and economic objectives. The government allocate resources into areas where private initiative is absent such as public sanitation, education, health etc.
(iv) Price stability: To maintain price stability and correct business cycles involving depression characterized by falling output, prices and increasing unemployment.
(v) Management of public enterprises: to manage public enterprises which are of nature of national monopolies like railways, electricity etc.

(i) Monopoly Power
(ii) Interdependence of Firms
(iii) Conflicting Attitude of Firms
(iv) Indeterminate demand

Money income refers to money received in the form of money, rather than in other forms.

The key difference between cost of living and standard of living is that cost of living is the cost of maintaining a certain level of living in a specific geographical region whereas standard of living is the level of wealth, comfort, material goods and necessities available in a geographical region, typically a country.

A capital market is a financial market in which long-term debt (over a year) or equity-backed securities are bought and sold Capital markets channel the wealth of savers to those who can put it to long-term productive use, such as companies or governments making long-term investments.

[pick any TWO]
(i) Insurance Companies
(ii) Building Societies
(iii) Pension funds

Reproductive Debt is a debt that has assets to balance it For instance, if a state barrows money for spending it on the construction of canals, railways, factories, etc., it is then able to repay the loan from these self liquidating projects.

(i) Municipal bond: This referes to a type of debt security instrument issued by agencies of the U.S. government for the purpose of funding infrastructure projects. Municipal bond security investors are primarily institutional investors such as mutual funds.

(ii) Corporate bonds: These are a type of debt security an entity can structure to raise capital from the entire investing public.

(i) Lack of cash: The credit creation power of banks depends upon the amount of cash they possess. The larger the cash, the larger the amount of credit that can be created by banks.
(ii) Credit control policy of the central bank: The power of commercial banks to create credit is also limited by the credit control policy of the central bank. The central bank influences the amount of cash reserves with banks by open market operations, discount rate policy and varying margin requirements. Accordingly, it affects the credit expansion

(iii) Leakages: If there are leakages in the credit creation stream of the banking system, credit expansion will not reach the required level, given the legal reserve ratio. It is possible that some persons who receive cheques do not deposit them in their bank accounts, but withdraw the money in cash for spending or for hoarding at home. The extent to which the amount of cash is withdrawn from the chain of credit expansion, the power of the banking system to create credit is limited.

(iv) Banking habits of the people: The banking habits of the people also govern the power of credit creation on the part of banks. If people are not in the habit of using cheques, the grant of loans will lead to the withdrawal of cash from the credit creation stream of the banking system. This reduces the power of banks to create credit to the desired level.

An economic development plan is a carefully built framework thats long-term in scope use in helping communities across diverse situations like a boom economy and a rapidly growing population, job creation and retention challenges, to remaining economically competitive and sustainable in a volatile and dynamic global market.

(i) Absolute socialist
(ii) Partial state socialist

(i) To Promote Exchange Stability: Before the Second World War, great instability was prevailing in the foreign exchange rates of different countries which had adversely affected the international trade. Thus, IMF has the objective to promote exchange stability and to avoid the bad effects of depreciation on exchange rates.
(ii) To Eliminate Exchange Control: Another significant objective of IMF is to eliminate the control over foreign exchange. During war period, almost every country has fixed the exchange rate at a particular level. This has adversely affected the international trade. Hence, it becomes inevitable to remove the control over exchange rate by boosting international trade.

(i) Financial support in times of payment difficulties.
(ii) Increased opportunity for trade and investment.

(i) Simple random sampling
(ii) Systematic sampling
(iii) Stratified sampling
(iv) Clustered sampling


(i) Stabilising the Business Cycle: Monetary policy has an important effect on both actual GDP and potential GDP. Industrially advanced countries rely on monetary policy to stabilise the economy by controlling business. But it becomes impotent in deep recessions.
(ii) Reasonable Price Stability: Price stability is perhaps the most important goal which can be pursued most effectively by using monetary policy. In a developing country like India the acceleration of investment activity in the face of a fall in agricultural output creates excessive pressure on prices. The food inflation in India is a proof of this. In such a situation, monetary policy has much to contribute to short-run price stability.
(iii) Faster Economic Growth: Monetary policy can promote faster economic growth by making credit cheaper and more readily available. Industry and agriculture require two types of creditshort-term credit to meet working capital needs and long-term credit to meet fixed capital needs.
The need for these two types of credit can be met through commercial banks and development banks. Easy availability of credit at low rates of interest stimulates investment or expansion of societys production capacity. This in its turn, enables the economy to grow faster than before.
(iv) Exchange Rate Stability: In an open economythat is, one whose borders are open to goods, services, and financial flows the exchange-rate system is also a central part of monetary policy. In order to prevent large depreciation or appreciation of the rupee in terms of the US dollar and other foreign currencies under the present system of floating exchange rate the central bank has to adopt suitable monetary measures.

(i) Promote economic growth through innovation: Just as we saw at the 2013 International CES, innovation and start-ups fuel our economic growth. They are the ultimate job creators who start with ingenious ideas, take risks and create value for the American consumer. Our nation has been built by encouraging entrepreneurship and innovation. Especially in our current economic downturn, it is crucial that we pursue national policies that promote innovation to ensure that there will be enough prosperity to carry on into the next generation.

(ii) Strategic immigration reform: As other countries aggressively reach out to skilled immigrants, we have made it more difficult for foreign entrepreneurs to come to and stay in America. Our refusal to let more highly skilled immigrants into America is costing jobs, delaying economic recovery and harming our international leadership in innovation and entrepreneurship. We should grant automatic green cards to STEM graduate students from U.S. universities and pass the Dream Act to allow law-abiding people brought to the U.S. as children to become citizens.

(iii) Require unemployed workers to volunteer: We encourage unemployment by rewarding the unemployed. All research shows the longer the unemployment payments the longer the jobless stay jobless. By shortening the duration of unemployment insurance and requiring those receiving checks to volunteer at a non-profit, both parties can benefit. By contributing to society, they can gain skills, contacts and references that will help them be successful in the next job they attain and in turn, we would see fewer people claiming unemployment.

(i) Provision of Industrial Raw Materials: The other product contribution made by agriculture for the development of the non-agricultural sectors of the economy, especially the secondary sector, is in the form of provision of raw materials. A study of the history of industrial development of advanced nations will show that the agro-based industries were the first to develop in such countries.

(ii) Food agriculture contribution: Clearly, agriculture’s food production capacity plays a vital role in all economic development and especially in that of underdeveloped countries, because: their people must be decently fed so that, among other things, production in the various sectors of the economy can be increased; their people must receive adequate incomes by providing them with jobs, in this case in agriculture: food agriculture must contribute to the growth of other sectors, above all, by providing the industrial sector with cheap labour, raw materials and sometimes, financial surpluses.

(iii) Export agriculture; Growth of some industry industries is still based on the strategic role of cash crops such as coffee, cocoa, bananas and even timber, which means not only that these products launched the growth of the economy, by monetizing it, but also that the incentive nature of their economic relations with food agriculture and with industry and commerce underpins that growth.

(iv) Diversified farming gave way to genetically uniform monocultures—fields planted with just one crop species at a time, such as corn, wheat, or soy, over a very large area. Meat, milk, and egg production became largely separated from crop production and involved facilities that housed a single breed of animal, during a particular period of its lifespan, for a single purpose (e.g., breeding, feeding, or slaughter)


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