COMMON PROFICIENCY TEST

GENERAL ECONOMICS[As per the Latest Study Material of CPT Issued by

Board of Studies, The ICAI for the Year 2014-15]

S.K. AGARWALFCA, ACS, LLB, DISA, AMIMA & ICAI Faculty Member

B-10, Khosla Complex, Gagan Vihar Extn., Delhi-110051.Email id: ca.skagarwal@gmail.com

S. CHAND & COMPANY PVT. LTD.(AN ISO 9001 : 2008 COMPANY)RAM NAGAR, NEW DELHI - 110 055

FIRST TIME MORE THAN 1100 NEW ADDITIONALQUESTION–ANSWER WITH DETAILED REASONING

S. CHAND & COMPANY PVT. LTD.(An ISO 9001 : 2008 Company)Head Office: 7361, RAM NAGAR, NEW DELHI - 110 055Phone: 23672080-81-82, 9899107446, 9911310888 Fax: 91-11-23677446Shop at: schandgroup.com; e-mail: info@schandgroup.com

Branches :AhmedAbAd : 1st Floor, Heritage, Near Gujarat Vidhyapeeth, Ashram Road, Ahmedabad - 380 014,

Ph: 27541965, 27542369, ahmedabad@schandgroup.combengAluru : No. 6, Ahuja Chambers, 1st Cross, Kumara Krupa Road, bengaluru - 560 001,

Ph: 22268048, 22354008, bangalore@schandgroup.combhopAl : Bajaj Tower, Plot No. 2&3, Lala Lajpat Rai Colony, Raisen Road, bhopal - 462 011,

Ph: 4274723, 4209587. bhopal@schandgroup.comChAndigArh : S.C.O. 2419-20, First Floor, Sector - 22-C (Near Aroma Hotel), Chandigarh -160 022,

Ph: 2725443, 2725446, chandigarh@schandgroup.comChennAi : No.1, Whites Road, Opposite Express Avenue, Royapettah, Chennai - 600014

Ph. 28410027, 28410058, chennai@schandgroup.comCoimbAtore : 1790, Trichy Road, LGB Colony, Ramanathapuram, Coimbatore -6410045,

Ph: 2323620, 4217136 coimbatore@schandgroup.com (Marketing Office)CuttACk : 1st Floor, Bhartia Tower, Badambadi, Cuttack - 753 009, Ph: 2332580; 2332581,

cuttack@schandgroup.comdehrAdun : 1st Floor, 20, New Road, Near Dwarka Store, dehradun - 248 001,

Ph: 2711101, 2710861, dehradun@schandgroup.comguwAhAti : DilipCommercial(Istfloor),M.N.Road,PanBazar,guwahati - 781 001,

Ph: 2738811, 2735640 guwahati@schandgroup.comhAldwAni : BhattColony,TalliBamori,Mukhani,haldwani -263139 (Marketing Office)Mob.09452294584hyderAbAd : PadmaPlaza,H.No.3-4-630,Opp.RatnaCollege,Narayanaguda,hyderabad - 500 029,

Ph: 27550194, 27550195, hyderabad@schandgroup.comJAipur : 1stFloor,NandPlaza,HawaSadak,AjmerRoad,Jaipur - 302 006,

Ph: 2219175, 2219176, jaipur@schandgroup.comJAlAndhAr : MaiHiranGate,Jalandhar - 144 008, Ph: 2401630, 5000630, jalandhar@schandgroup.comkoChi : KachapillySquare,MullasseryCanalRoad,Ernakulam,Kochi - 682 011,

Ph: 2378740, 2378207-08, cochin@schandgroup.comkolkAtA : 285/J, Bipin Bihari Ganguli Street, kolkata - 700 012, Ph: 22367459, 22373914, kolkata@schandgroup.

comluCknow : MahabeerMarket,25GwynneRoad,Aminabad,Lucknow - 226 018, Ph: 4076971, 4026791, 4065646,

4027188, lucknow@schandgroup.commumbAi : BlackieHouse,IIndFloor,103/5,WalchandHirachandMarg,Opp.G.P.O.,mumbai - 400 001,

Ph: 22690881, 22610885, mumbai@schandgroup.comnAgpur : KarnalBagh,NearModelMillChowk, nagpur - 440 032, Ph: 2720523, 2777666 nagpur@schandgroup.

compAtnA : 104,CiticentreAshok,MahimaPalace,GovindMitraRoad,patna - 800 004, Ph: 2300489, 2302100,

patna@schandgroup.compune : SadguruEnclave,Groundfloor,SurveyNo.114/3,Plotno.8AlandiRoad,

Vishrantwadi pune – 411015 Ph: 64017298 pune@schandgroup.comrAipur : Kailash Residency, Plot No. 4B, Bottle House Road, Shankar Nagar, raipur - 492 007,

Ph:2443142,Mb.:09981200834,raipur@schandgroup.com(Marketing Office)rAnChi : ShantiDeepTower,Opp.HotelMaharaja,RadiumRoad, Ranchi-834001

Mob.09430246440ranchi@schandgroup.com siliguri : 122,RajaRamMohanRoyRoad,EastVivekanandapally,P.O.,Siliguri, siliguri-734001,

Dist., Jalpaiguri, (W.B.) Ph. 0353-2520750 (Marketing Office) siliguri@schandgroup.comVisAkhApAtnAm : No. 49-54-15/53/8, Plot No. 7, 1st Floor, Opp. Radhakrishna Towers,

Seethammadhara North Extn., Visakhapatnam-530013,Ph-2782609(M)09440100555, visakhapatnam@schandgroup.com (Marketing Office)

© 2007, S.K. AgarwalAll rights reserved. No part of this publication may be reproduced or copied in any material form (including photocopying or storing it in any medium in form of graphics, electronic or mechanical means and whether or not transient or incidental to some other use of this publication) without written permission of the copyright owner. Any breach of this will entail legal action and prosecution without further notice.Jurisdiction : All disputes with respect to this publication shall be subject to the jurisdiction of the Courts, Tribunals and Forums of New Delhi, India only.

First Edition 2007Subsequent Editions and Reprints 2008, 2009 (Fourth), 2010, 2011, 2012, 2013, 2014 (Twice)Reprint with Correction 2015ISBN : 978-812-192-887-8 Code : 1008I 233printed in indiaBy Rajendra Ravindra Printers (Pvt.) Ltd., 7361, Ram Nagar, New Delhi-110 055 and published by S. Chand & Company Pvt. Ltd., 7361, Ram Nagar, New Delhi-110 055.

(iii)

PREFACE

Dear Teachers / Students,We are filled with great happiness and pride to present you this book which has been prepared

for the CPT (Common Proficiency Test) examination newly launched by Institute of Chartered Accountant of India. CPT is quite a welcome change from the previous structure of examinations, and this book has been prepared very specially & specifically for the purpose.

This book contains detailed notes and Multiple Choice Questions Answers with Detailed Reasoning on Micro Economics & Indian Economics Development. The book is concise, self-explanatory, to the point, complete and trustfull in every sense. It makes you aware of each and every aspect of the subject from which the questions may be asked in General Economics for CPT examination.

Our mantra is quality added with quantity. This book serves qualitative subject matter in the desired quantity of multiple choices Questions - Answers with detailed reasoning & we shall consider our efforts amply rewarded if those for whom the book is intended are benefited by it.

In the end, we would like to thank S. Chand & Company Pvt. Ltd., Ram Nagar, New Delhi and team members of the firm M/s BATRA DEEPAK & ASSOCIATES (Chartered Accountants) for their co-operation in preparing this book in the present form in such a shorter span of time.

While, every effort has been made to avoid printing and other mistakes. Inspite of the efforts, errors might have crept in. Any mistake or error noted may be brought to our notice, which shall be dealt with suitably. Further suggestions for the improvement of the book will be highly appreciated. Regards,

SHIV KUMAR AGARWAL(FCA, ACS, LLB, DISA, AMIMA & ICAI Faculty Member)

M/S AGARWAL TAXCON PVT. LTD.B-10, Khosla Complex, Gagan Vihar Extn., Delhi-110051. Ph. : 011-22050800/10/50 Fax : 011-66173862 Mobile : 9212406010, 9350811880, 9868150969E-mail: ca.skagarwal@gmail.comWebsite : www.shivcacs.com www. agarwaltaxcon.com

Disclaimer : While the author of this book have made every effort to avoid any mistakes or omissions and have used their skill, expertise and knowledge to the best of their capacity to provide accurate and updated information. The author and S. Chand does not give any representation or warranty with respect to the accuracy or completeness of the contents of this publication and are selling this publication on the condition and understanding that they shall not be made liable in any manner whatsoever. S.Chand and the author expressly disclaim all and any liability/responsibility to any person, whether a purchaser or reader of this publication or not, in respect of anything and everything forming part of the contents of this publication. S. Chand shall not be responsible for any errors, omissions or damages arising out of the use of the information contained in this publication.Further, the appearance of the personal name, location, place and incidence, if any; in the illustrations used herein is purely coincidental and work of imagination. Thus the same should in no manner be termed as defamatory to any individual.

(iv)

SYLLABUS AS PER ICAI FOR CPTGENERAL ECONOMICS (50 MARKS)

Objective: To ensure basic understanding of economic system, economic behaviour of individual and

organization

(I) MICRO ECONOMICS1. Introduction to Micro Economics

(a) Definition, scope and nature of Economics (b) Methods of economic study(c) Central problems of an economy and Production possibilities curve

2. Theory of Demand and Supply(a) Meaning and determinants of demand, Law of demand and Elasticity of demand

– price, income and cross elasticity(b) Theory of consumer’s behaviour – Marshallian approach and indifference curve

approach (c) Meaning and determinants of supply, Law of supply and Elasticity of supply

3. Theory of Production and Cost(a) Meaning and Factors of Production

(b) Laws of Production – The Law of variable proportions and Laws of returns to scale

(c) Concepts of Costs – Short-run and long – run costs, Average and marginal costs, Total, fixed and variable costs.

4. Price Determination in Different Markets (a) Various forms of markets – Perfect Competition, Monopoly, Monopolistic

Competition and Oligopoly(b) Price determination in these markets

(II) MACRO ECONOMICS: Indian Economics Development

5. Indian Economy – A Profile(a) Nature of the Indian Economy(b) Role of different sectors – Agriculture, Industry and Services in the development

of the Indian economy, their problems and growth(c) National Income of India – Different concepts of national income, Different

methods of measuring national income, Growth of National income and per capital income in various plans.

(d) Basic understanding of tax system of India- Direct and Indirect Taxation

6. Select Aspects of Indian Economy(a) Population – Its size, rate of growth and its implication for growth(b) Poverty – Absolute and relative poverty and main programs for poverty alleviation(c) Unemployment - Types, causes and incidence of unemployment (d) Infrastructure – Energy, Transportation, Communication, Health and Education(e) Inflation(f) Budget and Fiscal deficits

(v)

(g) Balance of payments(h) External debts

7. Economic Reforms in India (a) Features of economic reforms since 1991(b) Liberalisation, Privatisation and Disinvestment(c) Globalisation

8. Money and Banking(a) Money – Meaning and functions(b) Commercial Banks – Role and functions (c) Reserve Bank of India – Role and Functions, Monetary policy

(vi)

Examination Pattern Common Proficiency Test is an objective type test with 25% negative marking for

each wrong answer out of the total marks allotted to a question. In other words, 0.25 marks be deducted wherever a wrong answer is given in respect of a question carrying 1 mark.

ICAI notified that the passing requirement of CPT effective from June, 2013 shall be minimum 30% in each subject. So in General Economics minimum marks required for passing is 15 (30% of 50 marks).

This book contains 625 new additional questions from Micro Economics and 520 new additional questions from Indian Economic Development. All Ques. have been answered with detailed reasoning.

Note : In CPT exam, there is no need to give reasons, in the book these reasons are given only for the understanding of the students.

COMMON PROFICIENCY TEST (CPT) (ONE PAPER—FOUR HOURS—200 MARKS)

Level of Knowledge: Basic knowledge

SESSION-I (Two Sections—Two hours—100 Marks)

Section A: Fundamental of Accounting (60 marks)Section B: Mercantile Laws (40 marks)

SESSION-II (Two Sections—Two hours—100 Marks)

Section C: GENERAL ECONOMICS (50 Marks)Section D: Quantitative Aptitude (Mathematics & Statistics) (50 Marks)

FRE

QU

EN

CY

OF

IMPO

RTA

NT

CH

APT

ER

S O

N T

HE

BA

SIS

OF

PAST

CPT

EX

AM

S.Pa

per

3 :

Gen

eral

Eco

nom

ics

20

06

200

7 20

08

2009

20

10

2011

20

12

2013

TO

TAL

N

ov

May

D

ec

June

D

ec

June

Dec

Jun

e D

ec

June

Dec

Ju

ne

Dec

Ju

ne

D(E

)

3

2 2

1 3

2 2

4 2

4 2

3 4

4 3

41

CH

APT

ER

- 1

Int

rodu

ctio

n to

Mic

ro E

cono

mic

s

CH

APT

ER

- 2

The

ory

of D

eman

d an

d Su

pply

Uni

t 1

: Th

eory

of

Dem

and

3 1

3 3

6 6

7 7

1 5

2 3

4 2

2 55

Uni

t 2

: Th

eory

of

Con

sum

er B

ehav

iour

3

2 2

3 3

3

4 2

1 4

3 4

4 3

41

Uni

t 3

: Th

eory

of

Supp

ly

2 3

1 2

2 1

1 1

2 1

2 2

2 22

CH

APT

ER

- 3

The

ory

of P

rodu

ctio

n an

d C

ost

Uni

t 1

: Th

eory

of

Prod

uctio

n 3

3 1

3 4

3 3

3 3

1 3

3 3

3 4

43

Uni

t 2

: Th

eory

of

Cos

t 3

3 3

1 3

3 3

3 8

4 2

6 2

4 4

52

CH

APT

ER

4 -

Mar

ket

Uni

t 1

: M

arke

t 1

2 1

2

1 2

4 1

1 4

19

Uni

t 2

: D

eter

min

atio

n of

Pric

e 1

1 1

1

1

1

1 1

2

10

Uni

t 3

: Pr

ice

and

Out

put D

eter

min

atio

n 2

2 2

3 7

3 4

5 7

5 3

1

5 1

50

CH

APT

ER

- 5

: I

ndia

n E

cono

my

- A P

rofil

e

Uni

t 1

: In

dian

Eco

nom

y 2

1 1

1 4

1 1

1

4 1

3 2

2

24

Uni

t 2

: R

ole

on D

iffer

ent S

ecto

rs

2 1

2 2

2 1

4 4

2 4

2 1

3

1 31

Uni

t 3

: N

atio

nal I

ncom

e 1

1 2

2 2

3 3

3 4

2 2

2 2

2 1

32

Uni

t 4

: Ta

x Sy

stem

1 2

1 1

3 2

2

2 1

2 1

2

20

(viii)

CH

APT

ER

- 6

: A

spec

ts o

f In

dian

Eco

nom

y

Uni

t 1

: Po

pula

tion

2 2

3 3

5 2

3

1 2

3 2

1

2 31

Uni

t 2

: Po

verty

3

2 1

1 1

1

2 1

1

1 2

1

17

Uni

t 3

: U

nem

ploy

men

t 2

2 2

2 2

2

2 2

1 2

1

2 1

23

Uni

t 4

: In

fras

truct

ural

Cha

lleng

es

3 4

6 3

3

2 2

1 2

3 3

1 1

2 36

Uni

t 5

: In

flatio

n 1

2 1

1 1

6

1 2

1 1

6

1 2

26

Uni

t 6

: B

udge

t and

Fis

cal D

efici

ts

2 1

2

1

1

2 3

1 1

1 15

Uni

t 7

: B

alan

ce o

f Pa

ymen

t 1

1

1

3 1

1 2

1 1

2 2

1

17

Uni

t 8

: Ex

tern

al D

ebt

1 1

1

1

1

5

CH

APT

ER

- 7

: E

cono

mic

Ref

orm

s in

Ind

ia

Uni

t 1

: Ec

onom

ic R

efor

ms

in I

ndia

2

3 1

1 1

1 1

2 3

2 1

2 1

2

23

Uni

t 2

: Li

bera

lisat

ion,

Priv

atis

atio

n

and

Dis

inve

stm

ent

1 2

2 1

1

1

2

1 2

2

1 16

Uni

t 3

: G

loba

lisat

ion

1 1

3 3

1 4

3 1

1 4

3 3

1 2

2 33

CH

APT

ER

- 8

: M

oney

and

Ban

king

Uni

t 1

: M

oney

1

1 1

1

3

1 3

1

1

1

14

Uni

t 2

: C

omm

erci

al B

anks

1

2 4

2 1

2

2

1 1

1 2

19

Uni

t 3

: R

eser

ve B

ank

of I

ndia

(R

BI)

2

2 3

1 2

4 2

4 1

4 1

2 1

1 2

32

TO

TAL

50

50

50

50

50

50

50

50

50

50

50

50

50

50

50

750

CONTENTS

SECTION – I : MICRO ECONOMICS1. INTRODUCTION TO MICRO ECONOMICS 1 – 25 100 Qs. Ans. with detailed reasoning 21

2. THEORY OF DEMAND AND SUPPLY 26 – 62 Unit 1 : Law of Demand and Elasticity of Demand 26 Unit 2 : Theory of Consumer Behaviour 37 Unit 3 : Supply 44 100 Qs. Ans. with detailed reasoning 58

3. THEORY OF PRODUCTION AND COST 63 – 91 Unit 1: Theory of Production 63 Unit 2: Theory of Cost 72 100 Qs. Ans. with detailed reasoning 87

4. PRICE DETERMINATION IN DIFFERENT MARKETS 92 – 123 Unit 1: Meaning and Types of Market 92 Unit 2: Determination of Equilibrium Price 93 Unit 3: Price – Output Determination under Different Market Forms 96 100 Qs. Ans. with detailed reasoning 119

SECTION – II : INDIAN ECONOMIC DEVELOPMENT

5. INDIAN ECONOMY – A PROFILE 124 – 156 Unit 1: Nature of Indian Economy 124 Unit 2: Role of Different Sectors in India 128 Unit 3: National Income in India 138 Unit 4: Basic Understanding of Tax System in India 141 100 Qs. Ans. detailed reasoning 151

6. SELECT ASPECTS OF INDIAN ECONOMY 157 – 185 Unit 1; Population 157 Unit 2: Poverty 162 Unit 3: Unemployment 163 Unit 4: Infrastructural Challenge 165 Unit 5: Inflation 170 Unit 6: Budget and Fiscal Deficits in India 172 Unit 7: Balance of Payments 173 Unit 8: External Debt 174 111 Qs. Ans. with detailed reasoning 182

CPT General Economics

Publisher : SChand Publications ISBN : 9788121928878Author : Shiv KumarAgarwal

Type the URL : http://www.kopykitab.com/product/8089

Get this eBook

10%OFF