A2 Economics 9708 May/June 2025 (P32) Paper 3 (MCQs) Variant 2

Added: 2026-06-02

[00:00:02]We are starting with May June 2025 paper Three Variant Two Day Two Economics 1 Hour This is a 15 minute paper. Ok?

[00:00:13]So let's see Question number one.

[00:00:20]The diagram shows the budget lines for an Individual consumer. So given the budget line is the QRN of an individual consumer S.T. What could explain the shift in the Budget line from QR to ST? Look at the most First of all, you need to know one important thing about the budget line.

[00:00:34]You should know that for example we are Talking About QR We're currently at QR. Correct Is? Always remember one thing that what is Q and R Are you representing? It is very important to know this It is necessary. Q Basically this is representing has the maximum units of Y if all income Is Spent On Good and if I spend my entire income goodbye If I spend it then maximum I can earn Q I can buy units of Y. and the same goes For R shows the maximum units of X. If I spend my entire income on good x If I spend then r is the maximum Units of x I can purchase now you need to Keep in mind that if I invest my entire income in one If I am spending on good then another good It will obviously be zero. like for example If I'm operating at point q, I I have invested my entire income on Y. So its Meaning good x will be zero. Ok?

[00:01:31]Now it is said in the question that it is going from qr Am. going by qr means max Units of y also increased, maximum units of x also increased. Now maximum units What does it mean to grow? First, when I had my If I was spending my entire income then maximum I was buying so much. Now that I have completed my If I am spending my income then maximum this much y I am buying it. Earlier, when I spent my entire income If I was spending, then maximum I would have bought x amount.

[00:01:55]Had been. But now when I spend my entire income If I am doing it then I am buying maximum this much t Am. This could mean two scenarios.

[00:02:01]There can be two scenarios here. One thing So it is clear. of both goods Affordability has increased.

[00:02:08]The affordability of both goods has increased.

[00:02:10]The maximum units of both goods have increased.

[00:02:12]So only two scenarios are possible here.

[00:02:14]The price of either or both goods has decreased.

[00:02:19]The prices of both goods have fallen. either Income has increased. These two things have happened. His There is no other option. Ok? A Decrease in consumers' real income. No. If If the income was less, the budget line would move to the left.

[00:02:34]Affordability neither increases nor decreases. A Decrease in the quality of both goods.

[00:02:38]Quality does not affect budget line. End Increase in the consumers' money income. Yes N Increase in the price of goods. no increase If it had happened, the budget line would have come inwards.

[00:02:49]Affordability would have been less. Yes, if the price If there was a decree, it would have gone to the right. Ok? So This will also not happen.

[00:02:55]So C is the right answer. Every MCQ should B. Solved logically. Look at all the options.

[00:03:01]Son, even a donkey can tell the correct option.

[00:03:04]Correct? Why is the option wrong? Tell this a It is hard. Whoever is doing this should get out.

[00:03:11]It will go in the paper. If you don't want to do this Otherwise your marks will not come. Ok? So One's answer is C.

[00:03:18]Question number two. When is allocative Efficiency Achieved?

[00:03:23]Allocative efficiency can be viewed in two ways.

[00:03:26]Can. If you look at it as a market failure If you are looking from point of view then MSB = MSC If Point of Market Structure If you are looking from the view then MC Equ AR and Price because AR and price are equal There are. you already know this age nnn nnnnnnnn A2 level student You should know.

[00:03:41]When a Perfectly Comparative Market Is N Equilibrium Yes There is a reason behind this price cost revenue quantity What is a Perfectly Comparative Market?

[00:03:58]Is? Where Mr. Dark is. when The price remains the same. Perfectly Prices remain unchanged in the comparative market It would have been. When prices do not change, AR And MR are equal. I hope you like this I remember. And When Prices Are Different AR and MR are not equal. So demand is Equated to AR = MR, this is Mr. This is the marginal cost. this is the Equilibrium of a Perfectly Comparative market. MC = MR Now MC = MR but you Look, MC = AR also. MC = AR too So allocative efficiency happened. normal If you want to make a profit graph, make that too.

[00:04:37]Take. Let's look at efficiency in the long run.

[00:04:38]Still, this will be the point. When Everybody Who needs the product can obtain it. This Is equality.

[00:04:45]This is equity. This concept is equity.

[00:04:49]And Equality Selling does. Ok?

[00:04:53]When Firms Produce at the Lowest Possible Cost, This Is Productive Efficiency. When you pay your lowest cost Operate this productive efficiency it occurs. When Monopolistic Firms Make Normal profits. Brother Monopolistic When firms make normal profits The problem is access capacity. And If you look beyond that, Monopolistic competition is imperfect.

[00:05:12]Achieve Efficiency in Imperfect Competition It doesn't happen. Neither productive nor allocative.

[00:05:16]Unless you are a public sector monopoly also only does allocative productive She doesn't do that either. Ok?

[00:05:23]The Problem of Access Capacity You Should Be Remembering this. It is always at MC = MR Operate. Now you will say Sir, friend Even imperfect ones operate at MC = MR Are. So why allocative efficiency here?

[00:05:34]Is it not happening? Because the MC in Imperfect And Ar and MR are not equal. See MC = MR in a perfectly comparative market Pay allocative efficiency is therefore. Because If mR is equal to AR then MC and AR are also become equal when MC and MR are equal There are. This doesn't happen in Imperfect.

[00:05:51]MR and AR are not equal in Imperfect Would have been. When the prizes are different, they are It's not equal to MR. Now if AR MR If not equal then MC = MR per allocative How did it happen? It can't happen, right? So the answer to A will happen. Listen carefully to what I say By rewinding. Question number three. A Consumer Spends All of Their Income on only to goods X and the consumer is Initially in Equilibrium Maximizing Der Total Utility. Now the consumer is in Equilibrium Maximizing There Utility. What does total utility mean?

[00:06:23]Is? Equimargin Principle The equimarginal principle states that When the mu per dollar from both goods is Equal. Total utility is maximized.

[00:06:36]Correct? We already know this. so this this The scenario is ongoing. Now both goods Dollar is equal to MU. The Consumer Test Change and they get less utility from Consuming Goodbye. Now the scenario is a bit different.

[00:06:47]Has gone. The scenario is reversed such that if I do mu and over py now na and further saying that the prices of both goods are Unchain. Well, now he has just said that Utility Consumes a When Consuming Good By is falls. This means that MU of Y is falling. Now in the ratio The numerator is falling. Falling Numerator means the overall answer will be completely wrong.

[00:07:07]This means dollars from goodbye on MU now It has fallen. Now the ratio has become something like this Is.

[00:07:14]Now this is the ratio. And when such a scenario If it comes then should I tell a ration consumer?

[00:07:19]Will he? whose objective satisfaction There is maximization. What has he said?

[00:07:23]What would be a rational response. So ration The consumer's total utility is maximum Needed So what will he do? That good x to will increase and decrease good y.

[00:07:33]And then it will keep switching. He is a little I had taught you that right now that good X which He will do more bye, good or less bye.

[00:07:40]If he does then answer B is correct for three.

[00:07:49]Question Number Four: When Might a Moral Has It's a question now, these are the types of questions.

[00:07:56]Are straight out of a glossary the notes If it is correct then the child who will read the glossary These MCQs are possible for me otherwise not Because the meaning of moral hazard is if you If you don't know, you won't be able to do this. Now this There is no such thing as a 20-marker I used to read the details and these small things.

[00:08:14]Comes in MCQs. So Moral Haze's What does it mean? Look at Moral Haze Basically it means that when you When a person has many definitions but You should know the core concepts Needed You have to write the definition a little bit.

[00:08:26]MCQs. You just need to have an idea of the thing. When a Person Risks When a person Take more risk, I just made up my own definition.

[00:08:41]I have been. When a person takes more risk as they know Someone Else will buy the cost If Things Go Wrong Moral edge means that when you You take more risks because you know it It happens that if something goes wrong, Then the hat won't fit you.

[00:09:10]You will not be harmed. like for Example Car Insurance Best This is an example of this. When a guy drives a car If he takes insurance then he is careless.

[00:09:18]Does driving. He knows that if If the car breaks down, I have to pay some money.

[00:09:21]Are. Health insurance. When you have health Isn't it insurance?

[00:09:25]Yours? Your nail will also break if you do this. You You will go to the doctor. you know me I have to pay some money. So people misuse Things. When a Consumer Does Not Have Full Information about a product. See if You will get full information about the product If not then it is your fault. this is to It is called imperfect infection. This is Imperfect infection.

[00:09:44]When a person undertakes an activity that Cause a harm to another person. this is Intentional when a person undertakes an Activity that causes harm to another person.

[00:09:53]Meaning, this is the same example that I smoke cigarettes.

[00:09:55]and because of my smoking Someone else is being harmed. So this There is negative externality.

[00:10:03]When a person undertakes a risky Activity and knowing another person by the Risk. Yes this is a moral has it. when the The seller of a product has more information than the Bayer. This is a pure case of eccentric Infection. Remember this meaning of ascetic infection Isn't it? The seller knows better.

[00:10:17]The buyer knows little. Correct? Four Answer to C. Question number five the Diagram Shows Four Average Cost vs. Diagram Illustrates economy of scale I told you I had already told you where to look for the word scale.

[00:10:29]Talking about the long run is large.

[00:10:31]Talking about firms, economy of scale Diseconomies of scale only for large firms Small firms do not have Because scale means everything Factors of Production by Same Percentage These small firms cannot grow the economy Off scale means average cost Decreasing means decline of scale Increase in average cost What does unit cost mean?

[00:10:52]Ok? So short run short run these two Just remove the options. In this graph Look, the rising cost is visible. LRC increases Isn't it happening? So what does it mean to grow? Meaning What is this rising part representing?

[00:11:03]Is? Test of scale. So the answer will be C. D I am only seeing economies of scale Because the cost is decreasing. So this It won't happen either. The answer for five will be C. Correct.

[00:11:13]Meaning these MCQs should not be wrong.

[00:11:15]in any event. Question number six.

[00:11:18]What would enable a firm to increase its market share in a monopolistically Comparative market. Now look A monopolistically comparative market is one There is a market, which is the first thing Imperfect is part of competition.

[00:11:33]So there are many firms. From many firms The intention is that 20 to 30 medium size There are firms here.

[00:11:44]It can also be 30 to 40, 40 to 50. Any There is no defined number.

[00:11:50]What else happens? Product Differentiation it occurs.

[00:11:57]There is product differentiation and that is And that's what branding is.

[00:12:07]Advertising is taking place What else happens? And all these are its features It is basic. Now they are saying what would enable a firm to increase its market share in a Monopolistic comparative market. Now I of a monopolistic comparative market I am a part. How do I build my market share?

[00:12:29]Will I increase it?

[00:12:30]Barriers to entry. Barriers to Entry So there is monopolistic competition Because no one can enter through a medium size form Can. So low barriers means There is a lot of competition. market share is low will be. Anyone can enter the market.

[00:12:41]Collagen occurs in oligopoly. monopolistic I don't have it. There is no lack of competition.

[00:12:47]It happens. In monopolistic, there are many There is more competition. 30 to 40 or 20 There are not 30 less firms. elastic There is demand. monopolistic competition There is elastic demand brother. So high There is competition. There is little competition in small people.

[00:13:01]Advertising Absolutely Advertising Place A very big role in monopolistic competition.

[00:13:05]If your advertising is good, you can There is a lot of price and non-price competition.

[00:13:09]In monopolistic. Ok? So if your If the advertisement is good, then your goods It will sell, your demand will increase. Yours market share will increase and will the market Share means your sales compared to the overall sales so you need to increase your Sales so you can do this by advertising So six will be d question number seven two Manufacturing Firms in the Same Industries Producing Similar Products Are considering merging together?

[00:13:34]So this will be a horizontal major according to me.

[00:13:38]Now the very basics of horizontal merger There are benefits. Economies of scale, Purchasing and technical coordination should be better She goes. Departments get cut out Are. Rationalization occurs. All this There are benefits. what would be the least Canvassing Reason for this merger? basically you need to find a point which is not Related to horizontal merger. it wood Enable greater bargaining power when buying Raw materials. This is a benefit. it wood Enable technical economies of scale. This is A benefit. It Would Produce Savings in Management and administrative costs Here. This is rationalization.

[00:14:09]It would reduce the dependence on the firms of the firms on the suppliers of raw Material. This will not make any difference. Two The firm makes the same product in the same industry She is doing it, she is merging it. So the raw material How will it be easier to buy? what does this mean Did you talk? There would have been ease in raw material then is when you're doing vertical integration and That too a backward one. of vertical backward This means that you can take over your supplier.

[00:14:33]had been. Then whatever you have will be easy for you.

[00:14:35]In the supply of raw materials. otherwise then Horizontal has nothing to do with it.

[00:14:39]Is. So the answer to seven will be D. means this Is the Benefit of Vertical Backward Integration.

[00:14:47]Question number at. The Marginal Social The benefit of consuming a drink is less Then the marginal private benefit. one such Drinks in which MSB is less than MPB.

[00:14:57]This means MPB is greater than MSB.

[00:14:59]This scenario is going on. So basically this is A negative consumption externality.

[00:15:05]This is a negative consumption externality. So Basically this drink might be a demerit Good.

[00:15:12]Because negative consumption externality is Demerit is present only in good. Any What else would they be talking about, alcohol?

[00:15:20]Its opposite scenario is MSB = MBB Is. Ok? This is positive consumption.

[00:15:31]This is about merit good. What The question is about demerit.

[00:15:36]What would be the best policy to improve Resource allocation in this market? Tax Apply it. Should you advertise or not?

[00:15:43]Consume things. Give a subsidy. subsidy then Son, it is given on merit. here it is Scenario version will happen. If you have Gave subsidy. Increase competition for the drink.

[00:15:53]Why are you involved in these harmful things?

[00:15:56]Why increase competition? It is stupid that This should be banned. Impose Maximum Price Maximum Price Above The Equilibrium. Well, first of all, maximum The objective of price is to price to reduce.

[00:16:09]Now why should I make these liquors cheaper and Even if it is applied above, it will be wrong to apply it below.

[00:16:14]Needed And it should not be applied in this case.

[00:16:17]So minimum price should be charged here.

[00:16:21]Impose a per unit tax on the tank. Yes.

[00:16:25]Tax it. I mean, basically, what do I mean?

[00:16:28]Is? The MPB is greater than the MSB. Ok?

[00:16:30]The MPB is greater than the MSB. basically What is the scenario? it The price is.

[00:16:38]This quantity and this is okay? MSB = MSG is the socially optimum level of output.

[00:16:44]Now this is the socially optimal level of output.

[00:16:46]Ok? And this is the price. Now the society's We are not in equilibrium. Otherwise So there was no issue at all. well. Now in question It has said negative consumption Externality. Because what has he said?

[00:16:56]MSB is less than MPB. What does it mean The MPB is greater than the MSB. So MPB It's here. Now that MPB is here So clearly I understand the meaning of fun. fun It is coming. I was speaking. I am understanding That's it.

[00:17:16]Good I am asleep. Sorry. It will be made here MPB. Made it wrong. MPB will be built here.

[00:17:24]MPB is greater than MSB. MPB is Greater than MSB. MPB to MSB Is too much. This means clearly a case of There is over consumption.

[00:17:37]Clearly a case of over consumption. Ok?

[00:17:43]Ok? So this is your unit.

[00:17:48]There is an external cost. Because when the MPP If it is more than MSP then this The unit external cost is in consumption.

[00:18:00]Ok?

[00:18:02]Now let me tell you what is the meaning of tax? Tax by thinking that you You will increase the MPC. Because look always a Remember what I taught you in the lecture as well.

[00:18:10]Was. Whenever the graph of consumption externality If we make it then we assume no Production externalities.

[00:18:17]Assume we do no production Externality. Correct? This means that that the marginal social cost is the marginal private It is equal to the cost. Ok?

[00:18:28]So this basically means that marginal Social Cost and Marginal Private Cost Were equal. Now tell me what to do? These Which is the unit external cost, right?

[00:18:38]Because look why did he say this in the question?

[00:18:40]Is there a unit tax? Because he is on unit It is equal to external cost.

[00:18:46]So basically what will I do? This is from e1 There is an external cost per unit of a I will impose tax equal to this. So look at this Because I have to come back to q. So the MPC Bring it back. What does MPC retreat mean?

[00:18:57]It is true that you have increased the MPC. You private Increased the cost. You increased your private costs.

[00:19:02]and you got its consumption demolished and The price increased further. issue resolved. This is your The thing is clear Question Number Nine: A Country Government Ban cigarette smoking in enclosed public spaces Spaces Such As Offices Shops Bars And Restaurants What is a Government Failure Arising from this ban brother now the government Look, it has been banned and cigarettes are banned.

[00:19:39]has been banned. In public places, At offices, at shops, at bars, In restaurants, that is, in every public rush Cigarettes have been banned in some places. Now say What kind of fool is this? what such thing Which is a government failure? Meaning policy Please tell me the disadvantage in one way. decrees Consumption of cigarettes by smoke. This is an Advantage. Decrease levels of passive Cigarettes, smoking. Meaning, even those who are not drinking Apparently, there is less smoke going into his nose now.

[00:20:01]Used to be. This is the benefit. Increase letter from Used cigarettes outside offices and shops.

[00:20:06]This is a disadvantage. pollution is happening Is. Increase sales of cigarettes Substitutes like nicotine patches and gum.

[00:20:12]This is The success of this policy. This is the point.

[00:20:17]Correct. Now even nicotine patches and gum are available.

[00:20:20]Not a good thing. To break the habit You will do something, right? Do not do it directly Can. At least I am not praying. So this There is only benefit, isn't there? So the answer for nine is C.

[00:20:28]Question No. 10 A worker has a low wage.

[00:20:31]Well, one worker is now employed.

[00:20:34]I am employed. But it is low veg. they have little Incentive to Earn Extra Income Because They Will Pay More Income Tax and Receive Fur Means tested benefit. Correct? Good What Describes This Workers' Situation?

[00:20:56]Now look at the principles that these people have written.

[00:20:58]What has happened is this employment rap. These This is what these people have written.

[00:21:03]So employment wrap. But remember one thing This is the employment trap, isn't it?

[00:21:07]This is what employment trap means.

[00:21:10]Correct? What is the employment trap basically?

[00:21:12]It happens? This is the essence of the employment trap.

[00:21:14]Exactly means that you work at one place What are you doing. Are you working. Look, you are Employed. It's not like you're employed No, it is not. Correct? It's not that you You are not employed.

[00:21:29]I'm not saying that you You are not employed. You are employed. You Be employed but have no incentive to do extra work You don't have any incentive. Meaning If I give you that of the employment trap No, for example, a brother, for example, a guy He is earning a salary of $1000, right? And He gets benefits from the government $300 on the side. So what is his current income?

[00:21:53]Is? $300. Ok? Now he got it Promotion on job. His working hours increased.

[00:21:58]Now when his working hours increased, his The salary became $1200. Correct. his salary How much is it? At $200, it's obvious.

[00:22:05]Because his salary increased, his Benefits fell. Now its benefits which It's done, it's done, what are the benefits?

[00:22:11]Went? Now the income is still $300. But here at Now let me tell you, effective income is not $300.

[00:22:18]Because when the salary increases, so does the tax.

[00:22:20]Will increase.

[00:22:21]So tell me, can I stay for another hour?

[00:22:24]Will I work? I will not do it. This is an Employment Wrap. You Will Never Want To Go ahead in life due to this region. Meaning You will never be overworked For extra income because you know There is no use. the opposite is a loss I will. Are you understanding the matter? These There is an employment trap. well then one There is an unemployment trap.

[00:22:50]Then there is the unemployment trap.

[00:22:51]What does unemployment trap mean?

[00:22:53]The guy is unemployed. Now look at this In the example, he was employed. I I am unemployed. I am unemployed near me job no. I am getting benefits They are worth $800. unemployment benefit mill Have been. I got a job for $800 brother. Me Got the job. I was offered a new job And the wage I'm being offered is $900 Correct. And government benefits are over.

[00:23:17]It will be mine again. Now tell me one thing.

[00:23:19]Should I work day and night for $00 extra or Farik make $800 sitting? what better Is? I will earn Rs 800 by sitting in a shift. Pawar's No need. So this unemployment trap It happens. Now the thing is unemployment Trap and employment trap are part of Poverty trap. Poverty Trap Is a Broad term within which the unemployment trap and Employment traps come. Do you understand?

[00:23:43]talk? Is this clear?

[00:23:48]The Poverty Trap There are many reasons for this. Like Low Wages Is A Reason of Poverty Trap. high taxes are A Reason of Poverty Trap. loss of The danger of benefits is a poverty trap.

[00:23:58]Poor education is a poverty trap. lack of Skills are a poverty trap. Poor health Is a poverty trap. Poverty Trap One It is an umbrella term which includes so many All things come. Ok? So poverty Trap has its own meaning. not from poverty It is getting resolved due to many reasons. So this There are reasons. The Unemployment Trap Is a Reason Of poverty trap. Employment Trap Is a Reason of type of poverty trap. Basically.

[00:24:20]Now the whole thing is that it is not in our syllabus It is a broad term. There are no narrow terms.

[00:24:24]The Unemployment Trap in our syllabus or Employment is not a trap word. So The Best Option We Can Choose Here Is Poverty Trap.

[00:24:32]Correct? And if you look at the glossary, You can also check the glossary. Glossary I will give you That's why I am saying every word again and again when If you have an idea then you will not get stuck in the paper.

[00:24:41]Now this is glossary. I want to go to the drinking place, right?

[00:24:43]To.

[00:24:49]Look, look at this definition, now if you read it If it were also there, you might have done this MCQ You don't overthink so much now that term The employment trap is not in the syllabus itself Unemployment tribe, obviously that is the answer.

[00:25:00]If it doesn't happen then this is also something to think about.

[00:25:02]Familiarity with the word is very important.

[00:25:05]That's right, a situation where an individual and Family is financially better off receiving Means-tested benefits same Unemployment benefits, income support, All means tested are those benefits which Not everyone gets this, this creates little Incentive to take a job and work longer hours Because the loss of see what is written.

[00:25:20]Little incentive to take a job. This is an Unemployment trap. Little Incentive to Take a job. This is unemployment Trap.

[00:25:30]and work lager hours. This is an employment Trap. Because the loss of benefits and Higher Tax Out with Extra Income. So Unemployment and Employment Traps Part of the poverty trap. Correct. Me Many children were sending these MCQs On WhatsApp. I was not answering.

[00:25:45]The reason for this is that I want to record This was the one that was going to happen. Now I told you this thing. Ok?

[00:25:52]I hope you will not have any problem with this now. Correct Is? There is no question of liquidity trap here.

[00:25:57]Well, it is not born. liquidity trap Basically, failure of expansionary monetary policy There is a policy.

[00:26:05]Failure of Expansionary Monetary Policy.

[00:26:07]Meaning when you increase the money supply Meaning basically when you increase the money supply If yes, the interest remains unchanged.

[00:26:18]When People Expect That Interest Rate Can't fall any further. So the answer to 10 will be B.C.

[00:26:28]I am actually unable to sleep. not only this Understand that ah energy is very down. teach You need it, don't you. Ok? Well 11 what is not An outcome of the existence of private Property rights? Look, this is great now It is paper. Now what is a private Property rights? First of all, you should know this What is property right?

[00:26:49]Let us see its definition also. One minute.

[00:27:03]Here it is.

[00:27:05]Property rights. What is property right?

[00:27:07]the legal right of owners to control and Decide how their assets are used. The Legal Right of Owners to Control and Decide How Their assets are used. what does this mean now Is? Let's talk about property rights.

[00:27:21]I also write down my definition which I I tell the children. Private property rights That too is its own definition. But just your I am telling you the easy one.

[00:27:33]What Private Property Rights Mean that a business and an owner of a business Has the legal right or is the owner of an asset AAP's legal right to O!

[00:28:05]Use Cell Rent Out Arn Stop Others using Your Property Without permission.

[00:28:27]Meaning, if for example, I I own a property in some area.

[00:28:33]There is vacant land. There's an empty land that I own I do. Now I dance in it, I lie down, I sing songs.

[00:28:43]I can do anything. No one can stop me.

[00:28:47]If my place is encroached, I will file a case.

[00:28:50]Give. I will file a case. Developing possession It is very common across countries. any of your He will come and sit at his place and say, "I want to move."

[00:28:57]No. He will commit hooliganism. so you can stop Others from using your property without Permission. You will file a case against him. you can Rent out to someone.

[00:29:07]Either you own it, use it yourself or get it from someone else.

[00:29:09]Give it on rent. Earn from it. means this You will do all the things. By the way, for Example: I have an empty field. I I am getting that Qawwali done. Now when I If I get Qawwali done then those who live nearby Those who live nearby will be You can file a complaint against me, right?

[00:29:22]I will be accountable of I will be accountable for my actions Action is the most important form of private property right.

[00:29:30]The big advantage is accountability.

[00:29:32]Accountability is what you will do If someone has to pay for your property Your band is suffering losses, isn't it?

[00:29:38]If people give it to you, you will have to answer for it.

[00:29:40]The most important aspect of private property rights There is a huge benefit. Ok?

[00:29:48]Ok. Well then, it's obvious that I I will also take care of my property. I Will take care of my property. I will Invest in my property and make it Better.

[00:30:00]I will take good care of my property brother.

[00:30:02]I will invest. I am good to him I will do it. I use it efficiently I will do it. I did not lose my property I will let it happen. I will make money from it Output will be generated in the economy. near me There is an empty land. There I studied agriculture Let me start doing it.

[00:30:13]The country is the one benefiting, isn't it? I will Be accountable for my actions. If my Any wrongdoing is taking place on the property, Some consultation is going on, due to which people If I'm having trouble, I'll be account accountable if my if if people If people are harmed From my property. Not this market yet There is also a failure policy.

[00:30:43]negative Yes Negative Production Externality Eliminate negative production externalities There is also a policy to do this. negative Eliminating production externalities This policy also exists. property rights This is a very good policy. A More Market based solution is to establish and Strengthen Property Rights. Property Rights are defined as the legal rights of Owners to Control and Decide How There Assets are used. Now its example Its example is if households are granted Property rights given to a factory for polling their water supply and demand Compensation equal to the external cost when You have the right to your property and any tampering with your property Will do. You're getting some factory smoke Or the water in your pipeline is completely bad.

[00:31:32]went because a factory which is its own Was throwing waste into the water. anything like If it happens then you can take that factory to You will be held accountable for what you do.

[00:31:40]Are you there brother? damage to our property Why are you delivering it? or for example one There is a factory that is polluting.

[00:31:47]She will be accountable for a lot of this, right?

[00:31:49]of the thing. He has been given property rights.

[00:31:51]If he has got property rights then They are accountable for their actions. So if a Polluting Firm Holds Property Rights over its land local residents might have to Pay the firm to reduce harmful activity.

[00:32:02]Either you will give them money for harmful activity A Reduce it or get out of here.

[00:32:10]Correct? Either for example, which is a Polluting firms should pay compensation Do it. It can happen on both sides. either you Pay him money and put him aside. either that I have silenced you by giving you money. either you File a case against him. You will say get out of here.

[00:32:27]There is accountability. property on Rights are not so rare, they are not It is not so common. from property rights The pollution permits are more important. De R Better. While this approach in theory Creates incentives for negotiation and Accountability in Practice It Faces Serious challenges. Legal disputes can be costly and lengthy and their are often major Imbalances in Bar Bargaining Power Between Ordinary Citizen and Large Corporation. If you fight a factory He will get you arrested, he will harass you and silence you.

[00:32:56]You will not be able to do anything in these cases.

[00:32:59]Where Property Rights Cannot Realistically defined true edges with reverse And the atmosphere major too now River Who On Who has the right over the river?

[00:33:07]Whose right is above the atmosphere, meaning you You won't tell me that what happens around my house It's the wind, it's not like I turn it on.

[00:33:15]That's right, governments rarely intervene through Systems like pollution permits now pollution Permits are tradable permits we already know This is fine So what is not an outcome of the existence?

[00:33:28]of private property rights not given Encourage Private Owners to Conserve Property Where Its Value Is Expected to rise yes I know if My property's value is going to increase.

[00:33:36]I want to convert my property into a conserved property.

[00:33:38]I will look after it.

[00:33:40]I will maintain it so that if the value increases, I can sell it.

[00:33:42]They give private owners the incentive to Manage their property carefully, yes they make Private Owners Accountable for Damage to Others from property may yes they prevent Private owners gaining from using Resources to Benefit Others. No They Encourage Private owners. I mean, it's basically saying that I give my property to someone else Can't benefit. I can deliver Brother. I don't benefit anyone else.

[00:34:04]Can deliver. Brother, I am a farmer. I I am a farmer. I will not grow food Pay. So people will get food. I have money Will meet. Everyone is benefiting, right? Now this He is saying that brother, others do not benefit at all.

[00:34:15]It is possible. They Prevent Private Owners Gaining from Using Your Resources to Benefit Others.

[00:34:22]Ok? Or for example, restaurant brother I have a restaurant, so brother, I Am I giving benefits or service?

[00:34:29]Yes, he is giving me money, so both Benefit to I am a land lord. I I have given my place on rent for someone to live in.

[00:34:34]For. So to the one to whom it has been given to live Getting a place. I am getting rent Both benefit. Meri Meri Software There is a company. I sell software.

[00:34:42]So whoever got the software has his own There is benefit. I got the money. so this is It is a normal negotiation. This will definitely happen. Meaning This is a strange option. D is not basically An Outcome.

[00:34:58]Question No. 12. The diagram shows the labor Market for a Profit Maximizing Industry with a monopsony employer. See monopsony employer no profit Maximizing happens. So it always operates Does. Marginal cost of labor is Equals to Marginal Revenue Product of Labor. Profit Maximizing Level of On employment. Correct? So if a If there is a monopsony, then monopsony operates here.

[00:35:16]Will do. MCL = mRPL Ok? So she will do employment. Good Veg, she won't give this one. Yes. Not so I hope she will give me this veg. anytime Will not give. She always gives transfer endings Is. So the average cost is equal to the Supply of labor. The denominator of the supply of labor Point transfer ending occurs. So this Wali will give the veg. This is a way to buy a Monopson. This is a wage by a monopoly.

[00:35:39]Did you understand? What will happen if the minimum wage is reduced?

[00:35:42]Of W1 is introduced? Brother, if W1's If minimum wage has come then it means I am here But I have come.

[00:35:49]So wages also increased, employment also increased.

[00:35:56]What has happened to the decree? Then economic rent So There was no decree. In the transfer ending There was no decree. unemployment decree It has happened. Yes. If employment is increasing This means unemployment has increased.

[00:36:07]On the contrary, wages will increase.

[00:36:10]So the answer for 12 will be C. Because Introduce bola hai isne na what will Decrease? So unemployment is decreasing.

[00:36:17]Is. Increased employment means Less unemployment. So the answer for 12 is C.

[00:36:21]will be.

[00:36:23]Question No. 13 What is not a factor Affecting the supply of labour? So the supply of Immigration rates affect labor.

[00:36:30]Absolutely. Immigration will be higher.

[00:36:33]If exit is more then supply of labour will Fall. Labor participation affects.

[00:36:38]If women are participating in the labor force then supply of labor will Increase. Labor productivity has nothing to do with It is not to be given through labour supply. This leads to demand For labor pay effect comes. If the labor If productivity is increasing then employers will demand more of labor to demand for Labor will increase. Unemployment Benefits Affects the supply of labor. If Unemployment benefit becomes too high So people will leave the labour market. poverty There will be a trap in the supply of labor.

[00:37:06]Its answer will be C.

[00:37:14]Question No. 14 The Diagram Shows Demand for an supply of labour which to areas Represents transfer ending. Transfer now endings hota hai area below The Supply of Labor. and economic rent would be is the area Above the supply of labor together The ending becomes and below the edge Mark it with a diagram like this Economic rent is this transfer ending If the supply is below then this transfer ending If it is above the supply then this is economic rent So one is economic rent three is Transfer Ending One Is Economic Rent Four Is Economic Rent Ok?

[00:38:03]Two is transfer ending, three is transfer Ending. So this is what you have asked, so answer is C.

[00:38:09]will be. Two and four. To is transfer ending.

[00:38:12]Four is economic. Ok? So the answer will be C.

[00:38:17]Question number 15.

[00:38:22]An initial injection into the circular flow of income cause a much larger increase in the GDP. This is a multiplier.

[00:38:29]That if you get it injected then it will be in the national income.

[00:38:33]If there is a big effect change then this multiplier Is. So what does this define? This is the National Income Multiplier. National Income The formula for the multiplier is two if You may remember. The first formula is 1 - MPC. This is the first formula.

[00:38:47]Or the other formula is change in real National Income. which is basically the GDP Divided by Change in Aggregate Expenditure. Definition What I told you Did you teach me? National Income Multiplier. Now He has written it here. But also another There is a definition. Income is a function.

[00:39:00]Income is a function of rate of Change In aggregate expenditure. Now Aggregate What is included in expenditure? cix.

[00:39:13]Ok? What is the Accelerator Principle?

[00:39:16]Is? Accelerator Principles We Already Know Is. There is a basic formula for accelerator.

[00:39:21]Accelerator Equ Investment by Change In Income. For example, the answer here is 0.4.

[00:39:29]What does 0.4 mean? That 40% off additional Income 40% of additional income Goes Into Investment. Then its definition What did I teach you? Investment Is a function.

[00:39:50]Investment is a function off the rate of change in income. Meaning Accelerated Theory It says that investment is induced.

[00:40:07]Investment is dependent on income. Correct Is?

[00:40:15]Inflation on demand means AD Increase in price level due to increase.

[00:40:19]There may be a shortage in the economy. and autonomous Investment means looking at autonomous Autonomous means independent of Income. Induce means dependent.

[00:40:27]On income. Autonomous Investment Na Generali MC Principal comes in if you remember yes. In Margin and Efficiency of Capital.

[00:40:34]This is autonomous investment. As Nothing to do with investment income Is. Now there is an accelerator, so induce There is investment. The Complete Axiom Theory of MC. Investment is a function off the rate of interest Meaning on the basis of interest rate Investment changes. income basis It doesn't happen on The answer of 15 is correct. I I just gave you extra knowledge.

[00:41:13]The question paper is very exhausting, friend.

[00:41:16]No. 16 An increase in a country's inflation Rates Cause Real Incomes to Decline Obviously It is obvious that there is inflation in an economy.

[00:41:25]Price levels are rising I can write the formula directly.

[00:41:30]Real Income Percentage Equi Nominal Income Percentage Minus inflation percentage Inflation is rising, nominal income remains the same.

[00:41:44]So obviously real income will fall. inflation Adjusted means basically your purchasing power Is falling.

[00:41:52]But consumers decide to maintain their living Standard. Well brother, inflation is coming.

[00:41:56]Inflation is coming, your purchasing power is decreasing.

[00:41:58]It is happening, your real income is decreasing.

[00:41:59]Still you have the urge to maintain your Standard of living. This means that you then I have a lot of fun. is saying What has increased? I mean, how are you doing this now?

[00:42:08]What are you doing? You have inflation coming, things It is getting expensive. Your real income is low Has been. You maintain your living standard How are you doing?

[00:42:19]using savings Or are you borrowing from someone? These are the two ways And what are the methods? You are committing robbery.

[00:42:26]You won't do this. So what is saving and borrowing?

[00:42:30]Is the cheese increasing? what is Increasing?

[00:42:34]Autonomous Consumer Spending. Yes.

[00:42:37]The consumption you are doing is autonomous.

[00:42:40]Autonomous means independent of Income.

[00:42:44]Your income doesn't matter at all.

[00:42:46]Autonomous savings are not increasing.

[00:42:48]Savings are decreasing. If you your If you are using savings then your Savings are decreasing, right? Savings should be less Has been.

[00:42:56]Your savings are falling. and the principle if If we look at autonomous savings, then let's say it is decreasing.

[00:43:01]Is. Autonomous savings are decreasing. Edge Maintaining living standards I. So I am doing it from my savings only.

[00:43:07]From Past Savings And the question of induce saving does not arise.

[00:43:11]It doesn't happen. Induce saving means Dependent on income. Now the income is decreasing If it is there then the savings will be less.

[00:43:19]These induced consumers to spend less.

[00:43:21]Should be. The consumption that depends on income It is dependent. Look, understand the difference. induced Means dependent on income. of autonomous It means independent of income. Induce Consumption increases when income increases. Now Here the income is decreasing, so induce Consumption should be reduced.

[00:43:36]So this is the answer to this. Independent of Income. You are acting crazy.

[00:43:43]Ok? There will be more of this. Question Number 17 Which combination of income tax and Government Benefit Payment System will Produce automatic stabilization? Now What is automatic stabilization? To you You will remember it very well. automatic I taught you about stabilizer in physical In the policy.

[00:44:05]Automatic stabilizer is a modern form of Fiscal policy. It is an automatic fiscal Policy. Discretionary Fiscal Policy Nowadays It doesn't happen. Nowadays there are no automatic stabilizers They only happen. Look, this is basically what happens.

[00:44:19]This is my economic cycle.

[00:44:23]Ok? and This Is My Economic Cycle.

[00:44:26]This is economics. So much fluctuation Comes. This is my economic cycle.

[00:44:31]It is going up and down. Ok?

[00:44:35]There is greenery all around. Boom is too much Is. If there is recession, it is very severe. Now this Have to stabilize. Now create such a system We will have to make sure that the boom is not so shocking.

[00:44:43]Recession should not be so shocking.

[00:44:46]For example, let me give you an example.

[00:44:48]Am. When there is a boom in an economy, it The heel keeps growing with time. I mean I I am at my peak. The economy is growing very fast Has been. Now at this point, it's obvious that you You will reduce the AD. How will you reduce it?

[00:45:01]It is a contractionary fiscal policy. Childhood now So what do we call contractionary fiscal policy?

[00:45:06]Are you coming while studying? We are coming to read that government spending should be reduced, Raise taxes. This is discretionary.

[00:45:11]This is called discretionary, that is, reduce it.

[00:45:13]crank it up. This does not happen normally. These It happens automatically. Create a system that Already done. The government has automatically Will go. How? The government is not progressive Taxation system is in place.

[00:45:23]What is progressive taxation system?

[00:45:25]That as soon as your income increases, it is obvious People's incomes during boom times It increases. As soon as your income increases So the tax paid as a percentage of income also increases.

[00:45:33]Will go.

[00:45:36]Meaning you pay a large part of your income in taxes.

[00:45:38]You will give it in the form of. It is automatic. System It is progressive, isn't it? In Progressive Same thing happens. Taxes are as much as you earn Will you give? So taxes automatically increased.

[00:45:44]Withdrawals increased automatically. withdrawing If there is money then the economy is getting stabilized.

[00:45:51]Well, at the time of women's unemployment, It is very less. Now the government has The system is set means tested Of benefit. Not of Universal Benefit Meas Tested Benefits. Look Universal Benefit means benefit for all.

[00:46:01]Like subsidizing public transport.

[00:46:03]Gave. The rich are also getting benefits, the poor are also getting benefits. Not so nowadays Would. Nowadays there are means tested benefits.

[00:46:08]Are. Whoever needs it will get it. As Unemployment benefits. now when Unemployment is obviously a bad thing in an economy.

[00:46:13]Unemployment will be less during this time. When Unemployment decreases in a country Neither does unemployment benefit fall. Correct Is? Unemployment benefits fall. So Government spending should automatically decrease Has been. automatically which the government The spending is decreasing. So They used to do the same thing in discretionary also. So Injections automatically decreased. injections A variable of is required. Now look at me Don't do anything. It happened on its own. what did I Reduced government spending? what did I Taxes raised? I didn't do anything.

[00:46:39]The government has set up the system like this That this is happening automatically. where the economy You were going up there like a mad person.

[00:46:47]Now she will go like this Slow growth will come automatically in the economy Inflation will be controlled and stabilized.

[00:46:52]will go For example, I say in the country There is recession Income is decreasing automatically as per tax paid age A percentage of income will decrease It is progressive, the withdrawal has reduced automatically.

[00:47:06]Because AD is lower during recession.

[00:47:08]Now I have to increase the AD, so obviously We need an expansionary fiscal policy I will reduce taxes I will reduce taxes, spending I will increase it. This will happen, right? How it will happen? And There is no way. and when Unemployment increases during recessions, doesn't it?

[00:47:21]The government itself is unemployed It gives benefits.

[00:47:25]So spending increases. Injections increase Went. It happened on its own, didn't it? It means wherever The economy had to fall suddenly.

[00:47:32]She will fall like this. She will fall there like this. See Now this was the actual output without width Stabilizer. This was with stabilizer. You See the difference that stabilizer makes.

[00:47:43]Does matter. So automatic stabilizers are Active in all economies. You Need to Control Your Economic Sal. Otherwise so many fluctuations There will be problems in your economy that you cannot handle.

[00:47:52]You will be able to do it. Ok? So at present time Less of Discretionary Fiscal Policy being used and automatic fiscal More of a policy. Automatic Fiscal Policy I tell the children to remember Am. Otherwise it would have been an automatic stabilizer Is. And there is fiscal policy because here Whatever happens is happening because of spending and day.

[00:48:08]Used tobe.

[00:48:11]Answer 17.

[00:48:20]Question No. 18 The diagram shows the Actual and forecast changes in the GDP For a country between 2020 and 2040? So 20 Data for the year is given. Actual Output is given and potential output is given Is. what is the longest period over which this country is expected to Experience a recession? So recession means Real GDP decreases. so where Is real GDP declining? well now this Look at recession, boom, growth, slump, all this.

[00:48:43]Seen on Actual. in the long term I don't see all this in the long term.

[00:48:46]There is only an upward trend. Long Term Is It is a trend. I have taught you Long ago.

[00:48:52]Where is he falling from? fall from here It has started and is falling till here. Just this The falling part is recession. 2025 Answer will be from 35B.

[00:49:06]25 to 30 No, there is more beyond that, not 30 to 35.

[00:49:13]30 to 40 is growth.

[00:49:22]Question No. 19 The Diagram Outline The Monetary transmission mechanism following Quantitative Visioning Now What Was MTM That Money supply causes changes in interest rates Change in exchange rate from interest rate Eddie comes on the change, the whole mechanism comes Now ATM also, if you remember, is a direct Was which was from the monitors who simply said If the money supply increases, inflation will occur.

[00:49:45]Is. There was an indirect one that belonged to Keijian.

[00:49:49]Keyjian says no money supply when If it increases then the interest rate decreases.

[00:49:52]So that's the whole story of the money market. and this I think it's the one with Qingjian. and this It's Kanjiyan's one. This is indirect So quantitative reasoning means money Increasing the supply. So increase the money supply There are many ways of. Now it is saying Central Banks Dash Government Assets. Now Government assets mean bonds.

[00:50:14]So bye, money supply has to be increased.

[00:50:16]If you want to give money in hand then she will say goodbye So that the bond comes to the Central Bank.

[00:50:22]The government should get the money. Now that the money If the supply increases, then money in the money market The supply of money exceeds the demand.

[00:50:29]So there would have been access liquidity in the economy Is.

[00:50:32]What if there is access to liquidity?

[00:50:34]It happens? The interest rate is low.

[00:50:38]Interest rate falls Interest rate will fall So the cost of borrowing will be less.

[00:50:45]So investment will increase, people will borrow more.

[00:50:47]People will borrow more Investment Rise If investment increases then GDP will increase Which word completes the gap then one is by Two Is Fall Three Is Rise A Answer Question number 20 a government decreases interest rates to Reduce Unemployment But Finds This Has A little effect due to hysteresis What causes this hysteresis? Now look.

[00:51:34]Hysteresis is also a word that Again, I don't study for 20 markers, but I taught you about unemployment.

[00:51:38]Let us look at its definition once. Same The thing is. Look, he is teaching me the use of glossary.

[00:51:44]I am telling you more benefits Glossary of such words if they appear in the paper If you go then you will not have any problem.

[00:51:58]A situation where unemployment is caused by falls In aggregate demand perseveres even after Aggregate Demand Recovers Because Workers Became discouraged and demotivated after Being out of work for a long time Making It Harder for Them to Find Jobs Again. This is the Keyjian phenomenon. Keynesian He had said this. Kijiye said that when In an economy the AD drops and then when you You recover it and increase the heel So if AD is increased then production increases.

[00:52:19]Is. Demand for labor increases.

[00:52:20]Unemployment decreases. So to say this Sometimes unemployment is not less talked about.

[00:52:24]It would have been. It does not happen because people who Those who lost their jobs due to shortage. Now When the AD increases, then immediately get into some job.

[00:52:31]He will come. Who knows, he got de-skilled?

[00:52:33]yes. Who knows, he might have forgotten his skills. What The addressee may have become demotivated. What to Know Early He may have retired. Like after Covid Many people lost their jobs due to Covid. Now its hysteresis Bum true during Covid. A lot in Covid People lost their jobs. I know people like that Those who lost their jobs. after that after that He never held a job. Either Early I have retired. either got disqualified, Got demotivated, became outdated. replace Have become. This could also be because the After the AI ​​shift that came after Covid Many people went. So either they get demotivated Or got disqualified. Forgot the work or It is of no use. Correct? So This is what hysteresis means.

[00:53:17]Why so? Look, that's what he's saying.

[00:53:19]Reduced the interest rate. Now the interest rate When it is low, the cost of borrowing is low.

[00:53:23]The higher the savings, the lower the return on savings. So Consumption also increases, investment also increases, AD also increases, production increases, the demand for labor increases, Unemployment decreases. But it should not be so remained. Little by little, the effect is huge.

[00:53:34]Capital investment increases. No.

[00:53:36]Fewer people are inks to safe. No. skills Of unemployed workers became outdated. it The Money Supply Increase This reduces the interest rate. the same no c This is the answer. Skills of the Unemployed Workers have become outdated. This This Is The Reason.

[00:54:00]Question No. 21 In a Closed Economy?

[00:54:02]Closed economy means no x - m trade Not there. Export is not import. The Central Banks Race Interest Rates Too Reduce increasing rate of inflation. Meaning Interest rates have been increased, obviously Eddie To reduce it. Inflation will reduce. obviously which economic policy objective is This is targeting a surplus on the current account.

[00:54:19]of the balance of payments. Watch Eddie's [ __ ] If this happens, there could be a current account surplus.

[00:54:22]Is. Because AD will be less, income will be less.

[00:54:25]There will be, imports will reduce, imports will reduce It will be done. So obviously current account There will be surplus. But this is not their target.

[00:54:30]Their target is to reduce inflation.

[00:54:33]The answer could be this, but it is not here.

[00:54:35]Because it clearly indicated inflation.

[00:54:36]given means this is a this is an effect this May be a policy objective but in this case No, because clearly inflation This has proved that faster economics is correct.

[00:54:46]There will be no growth, obviously the AD will be less.

[00:54:47]There will not be full employment either.

[00:54:49]If unemployment is decreasing then it is on the contrary Stable prices will increase if AD decreases Inflation will be controlled, stable prices 21 will be D So this age well But the Question Is focusing on inflation 22 A government sets a target for the Annual rate of inflation to be no more than Is 3%. My target is inflation to be 3%.

[00:55:25]It should not be more than that. We Circumstances Would Make It Difficult to achieve targets if devalued of the currency leads to a trade surplus a There will be an answer. Devaluation means you deliberately devalued its currency, which Because outsiders may find your price cheap.

[00:55:38]Used to be. You find the ones outside expensive.

[00:55:40]Now your trade is in surplus. Trade Surplus means export revenue is Greater than import expenditure.

[00:55:47]So Eddie grew. What is due to the increase in AD Demand full inflation occurred.

[00:55:54]Ok?

[00:55:57]So the target will not be achieved with this. If Interest rates are increased to control Affective demand. This is correct. interest rate If it increases then the AD will decrease. then this will Help to achieve the target. If the government Increases tax revenue. So the tax If increased, the AD will decrease. Income tax hike Gave, increased corporation tax then AD So it will be less, right? low disposable income Will happen. If the investment is less then the target It will help in achieving it. If Wages Increase Are kept in life with productivity. See If wage increase is linked to productivity If the match is related to increase then business The cost will not increase.

[00:56:23]Because what happens generally? like an example As I tell you for example that increase of veg Is greater than increase in productivity.

[00:56:32]This means that the productivity of the worker is so It is not increasing but the wages have been increased as much as possible.

[00:56:35]We. So in such a scenario the cost increases Is. So if wage increases and productivity If it is matching the increase then it means what happened that there will be no change in the Cost. And if the cost doesn't change, There is no risk of cost inflation.

[00:56:46]This will help to achieve the target. So a The answer is wherever the ready is moving, wherever you are.

[00:56:50]It may go above the target Inflation. A Question number 23 of 22 Central Bank of a Country Decrease Interest Rates What Are the Likely consequences to internal value of Currency is the purchasing power, this I tell you I have already told you. external value of the Currency is basically the exchange rate.

[00:57:12]Reducing interest rates.

[00:57:15]Reducing the interest rate means that The value of your currency is decreasing. First Because it is obvious that when If the interest rate is low then in your country Hot money flows will no longer come, so your The demand for currency will decrease. People are your You will not save money by coming to the country.

[00:57:29]Your bank's return on savings is low Used to be. So your demand for currency will Fall. No hot money flow will come. Sleep Exchange Rate Will Fall. I gave my children a little I have also made you cram. interest rates and The exchange rate relation is positive. So The external value of money will fall anyway.

[00:57:44]Has been. The internal value of money will also fall.

[00:57:47]Needed because of the low interest rates Meaning that the AD will increase. What does it mean to grow taller?

[00:57:50]There will be inflation in the economy. And Inflation means that purchasing power It is decreasing.

[00:57:58]Ok? Fall Fall will be an answer.

[00:58:02]Purchasing power of note. Even if a ₹50 You used to buy a seal for ₹100 and it has now become ₹60.

[00:58:07]So the purchasing power of ₹50 has reduced, right?

[00:58:09]Now the answer to 23 will be A Question No. 24 What is the most likely Consequence Now Consequence Can Be positive can be negative okay Consequences do not always mean negative.

[00:58:21]Hota when there is an increase in the national Dept now National Day means Government Borrowing is increasing over Now what generally happens is that when National Day If it increases then it means the government which Isn't she basically taking a loan? So loans The demand is increasing. Now the competition for The loans have increased, right? Government is also taking loans Is. The public is also taking loans. So, of the loans Demand will increase. So the loanable funds theory What does she say? See Loanable Funds Theory What happens in? Supply of loans. demand For loans. Demand for loans shifts rightward It is happening. Then the interest rate will increase.

[00:58:56]And when the interest rate increases, Investment will be less. Because it adds a cost Off-borrowing is on the rise. The Creation of Additional money. No. Look, National Day is coming up.

[00:59:09]Correct. National Day is approaching. so necessary It is unlikely that the money supply will increase.

[00:59:14]Who knows what the government did to the Boro people?

[00:59:16]It has happened. By issuing bonds. Dept.

[00:59:18]Financing has been done.

[00:59:21]Get debt financing. That public sector Borrowing Requirement PSBR.

[00:59:28]So if you have issued bonds then this So the money supply will decrease. It is not like that Is. a current account deficit on the balance of Payment. There is no link to National Day From. A surplus in the government budget. Brother National Day is always the reason for the budget deficit.

[00:59:40]From. When a government has a budget deficit Isn't it when the government spends tax?

[00:59:45]It is more than revenue. This Leads To National Dept. Ok? So this will not happen.

[00:59:50]Correct? deficit Leeds to National Day.

[00:59:59]Correct.

[01:00:01]And this is asking for effect. don't ask the cause remained. The Crowding Out of the Private Sector Investment. Yes, this is called Financial Crowd.

[01:00:07]Says out.

[01:00:10]This is crowded out. Look at a crowding out We have read in the Physical Policy itself that when If the government increases its spending How does it increase? If you have a loan, increase it Is. Correct? So the national debt increased there too.

[01:00:20]It has been happening. So it is the same thing. Two perspectives There are some things to see. Either you look like this Government spending is increasing. Economy Aggregate expenditure is increasing.

[01:00:28]Incomes are increasing. Money demand is increasing Is. Money demand equals money supply.

[01:00:32]There is a liquidity shortage. interest rate It increases. Investment decreases.

[01:00:36]This is also a crowd out. This is also a crowd It is out that the National Dept is increasing so The government has borrowed. So, of the loans The demand is increasing. interest rates are rising Is. This is also a crowding out of investment.

[01:00:48]Financials are crowded out. Ok? So 24 is D of.

[01:00:52]Question No. 25 V Policy Will Help To Reduce Income Inkity? So income equity is less Have to do it. The gap between rich and poor has to be reduced.

[01:00:58]If you are increasing the indirect tax then you No one is a bigger fool. Because Indirect tax is aggressive. Rich He is also giving the same amount. The poor should also give the same Used to be. By increasing indirect taxes, you become poor.

[01:01:06]You are increasing the burden on me. Poor Pay If you increase the burden then you will get the inequality of income.

[01:01:11]Will increase. Increase trade union power.

[01:01:14]Yes. If you increase the power of trade unions then it will be better There will be negotiation. The wedges will increase. This will Lead to a Fall Incity To increase the rate of interest. interest When you increase the rate, consumption will decrease.

[01:01:25]If investment is low then AD will fall. Eddy If unemployment falls, unemployment will rise. unemployment If Inkiti rises then Inkiti will also rise.

[01:01:33]To Reduce Welfare Payments. stupidity again Is. If you are reducing the benefits then Inkity Will increase.

[01:01:39]25 will be B. Question No. 26 The Value Of the currency of an open economy. open economy means where x - m is with a fixed The exchange rate is significantly below its Purchasing Power Parity Value. Now what Is Triple B?

[01:01:56]Pakistani children relate very well Triple B on top of that triple B There is no talk of this. Ok? Purchasing There is talk of power parity. Purchasing What is power parity? Watch Purchasing power parity is basically a concept through which you Compare the cost of living between countries.

[01:02:16]Purchasing power parity is understandable from the word itself.

[01:02:18]Used to be. You compare the cost of living Yes, of these countries. The easiest way to understand this The method is The Big Mac Theory.

[01:02:26]McDonald's Big Mac is a burger.

[01:02:29]For example, USA and Pakistan Prices have to be compared. Big in the USA Mac is, for example, $2 in Pakistan.

[01:02:37]Big Mac is for ₹100. Well, right now for ₹100 Even egg bun kebab does not come to Pakistan But the Big Mac became ₹100. For Example now USA Big Mac McDonalds It's $2. It costs ₹100 in Pakistan. Now According to this, the exchange rate between Pakistan and US should be $1 = 50 According to BigMak Theory The exchange rate between Pakistan and USA should be $1 equal to $50 Now let's compare this with the actual Exchange rates. There can be two scenarios That brother Triple P is saying this Triple P is saying that $1 Equal to ₹50. Ok? Triple P Kah It is being said that $1 is equal to ₹50. which is Greater than the actual exchange rate. So For example, I say actual The exchange rate is $1 = ₹25. This is the actual rate.

[01:03:29]This is the actual exchange rate. This is actual The exchange rate is. For example, it means This is what happened if Triple P is greater than the Actual exchange rate means we In this scenario, the dollar is undervalued.

[01:03:42]Dollar is undervalued and Rupee is Overvalued.

[01:03:50]Ok? And if I tell you that Actual exchange rate is greater than the Purchasing power parity is the reality that $1 is worth ₹280 for example and Purchasing power parity according to $1 Equate two is ₹50. So it is clearly visible that Pakistani currency is a lot more Undervalued than US currency. So the US It is very overvalued. Ok? So this What has he said in the example?

[01:04:20]It has said fixed exchange rate Below is the purchasing power parity.

[01:04:27]This means this is the scenario.

[01:04:34]This is what it means, isn't it?

[01:04:37]The fixed exchange rate is significantly Below it's purchasing power parity. Yeah so It is there.

[01:04:45]The fixed exchange rate is below its Purchasing Power Parity. Ok? If the Economy Decides to Adopt a Floating exchange rate which of its Microeconomic policy aims are most Likely to benefit? Now look what is happening Is. Brother, the one from my country is fixed The exchange rate is below the purchasing power.

[01:05:02]It is a priority. Correct? So for example I am US. Fixed from $125.

[01:05:08]And my currency is for example Below is the purchasing power parity. Its Meaning I am undervalued. I am Undervalued. Ok? I am undervalued.

[01:05:16]If I put my currency on floating I give. Correct? If I change my currency If I put it on floating, it means What happened?

[01:05:23]that the value of my currency is Will increase. What will be the value of my currency?

[01:05:28]Will increase. What is the meaning of this? that brother for Example, if in this statement it has said this It has been said that the Country with fixed exchange rate is Significantly below its purchasing power Popularity value. So this means that No, I looked at it the other way around. Sorry Buddy. This scenario should not be like this. one minute Stop. I got confused. The scenario is this Basically I am Rupees. We Assume Pakistan Let's do it. Not to the US. We Pakistan is there. We have fixed the currency.

[01:06:00]He is from the US. We fixed the currency with the US It is curried. $1 equals ₹280.

[01:06:05]Correct? So we can go by purchasing power parity.

[01:06:08]It is very much undervalued. Because Purchasing power parity says we can sell at ₹50 should be equal to $1 per reality 280 Equ is $1. It's much better this way Look You can do it with that also. But I'm easy I am getting it done in this manner. Correct? repeat back I am doing it. The question says that your Purchasing Power Parity Look back and read it.

[01:06:28]The question is saying that your purchasing power Parity is high. Fixed exchange rate low Which is matching completely. Here Purchasing Power parity is ₹50. of my currency value There is more here. Actual Exchange on I am very undervalued in rates.

[01:06:47]If I keep my currency freely floating I will leave it to you. If I change my currency I leave it floating freely. If Left Too Freely Floating So I will come down from 280 to 50. What does it mean The value of the rupee will increase. What does it mean Rupees will be appreciated. Because Freely Floating means you Forces of Demand and Supply Pay The currency has been abandoned. You forced Except currency on demand and supply Has given.

[01:07:20]Correct? So left freely floating Neither Pakistani currency is appreciated Will go.

[01:07:26]This will not happen.

[01:07:30]Ok? It is fixed. So if the Economy Decides to Adopt a Floating exchange rate which of the microeconomic Policy Aims Is Most Likely to Benefit.

[01:07:38]Now what happens with appreciation?

[01:07:39]Appreciation leads to low inflation. Yes.

[01:07:42]Because appreciation means export The price will increase. Import Price It will reduce. So one is export If the price increases then the AD will fall because Export revenues will fall and Cost due to reduction in import prices If push inflation decreases, it will come from all sides.

[01:07:57]Is inflation being controlled or is it cost push?

[01:07:59]Demand has also opened up, unemployment has not decreased.

[01:08:01]If there is an AD fall, there will be unemployment.

[01:08:03]will increase Deficit will not be reduced Reduce Deficit Deficit reduction on the current account of the Balance of Payments deficit will now be reduced or it won't Why will the deficit increase? Why will it increase?

[01:08:18]Because imports are getting cheaper. So Import expenditure will increase. So The deficit will increase.

[01:08:25]There is no steady economic growth. Eddie Falls Used to be. CA answer will be 26. Ok? So Don't get confused about that. By the way, this question Well, this is just a matter of personal matters. So much There was no need to lengthen it. I have very Made it too long. I will also direct you I could have told. But I gave you purchasing power.

[01:08:40]Parity has been explained here. Look at the same The thing is. Definitions are variant. Correct.

[01:08:44]If you look at its definition See A Method of Comparing International Living Standards by Measuring the Value of a currency based on the amount needed to Buy the same basket of goods and services in Different Countries read from my Big Macs.

[01:09:00]Ok?

[01:09:03]So the answer to 26 will be this. Question number 27 saying which policy will help to Correct a deficit. Deficit on the Current Account of the balance of account? Correct Have to do it. Correct. Deficit means Outflows R greater than inflows. Have to correct it.

[01:09:19]What does correct mean? Meaning of correct This is that I have to increase the inflows.

[01:09:25]Outflows have to be reduced. That's right.

[01:09:28]I will reduce the direct tax so that My disposable income should increase. The heel should increase.

[01:09:33]Good exports should increase. Obviously, income If it increases, exports will increase. outflows increase Go. no no sorry eddy will increase eddy will increase then income will increase If incomes increase then import expenditure If it increases, it will increase outflows.

[01:09:51]Then it will make matters worse Decreasing Government Regulation is the Answer It will happen brother, reduce regulation on the supply side.

[01:09:57]This is policy, it means reducing regulation.

[01:10:00]You have reduced rules and losses in the market.

[01:10:02]Competition increased, rules and losses reduced If the cost of businesses also reduces then this The price of exports has decreased.

[01:10:09]Fort's revenue will increase. Inflows will increase So the deficit will be less. Increasing Exchange rate. Increased exchange rate Diyo. This means appreciating the currency.

[01:10:19]Two. Do something crazy. Export Price Increase it. Reduce the price of imports. Brother This will increase the deficit. Government Increase your spending. Raise the heel. to Eddie You will increase it. The entire same impact will occur. whole beans There will be an impact. Correct? So B will be the answer.

[01:10:36]Question No. 28 The Table Shows the Possible change in population, the rate of inflation and the Number of years of education to number of Talking about years of schooling.

[01:10:44]Which Combination Would Lead to an Increase In both the real GDP per capita Per capita means per head. So on real GDP What does capita mean? Real GDP Divided by Population and the human development. Bhai Dekho Years Off schooling comes into the HDI. Life Expectancy comes into HDI and GNP is included in the HDI. So years of Schooling should increase, right? to HDI You have to increase it.

[01:11:10]The rate of inflation should be low because If the rate of inflation is low, it will lead to real Will increase.

[01:11:16]Ok? And population also rates on real GDP If you want to increase it then watch it grow Needed This should reduce, right? Numerator If it has to be reduced then the population should fall. Then a There will be an answer. Drop the numerator. oh sorry Drop the denominator. population is Denominator no. Drop the denominator.

[01:11:35]Increase numerator and years of schooling should not increase because part of HDI This is it. Correct? So inflation will decrease Real GDP will increase. If the population decreases The head on overall real GDP will increase. Because The denominator is decreasing. So the overall answer is Should increase years of schooling So that will increase the HDI. So 28 will be A.

[01:11:54]Question No. 29 The following are four conditions Some attach to IMF loss to low income Countries with conditions in conflict Infant Industry Argument Infant The industry argument says that you should Protect Your New Industries From Foreign competition so you should put taxes on Imports tariff you should put quotas meaning employ the tools of protectionism and Stop imports so that people can buy domestically.

[01:12:17]Buy and grow new industries, then the Need to follow free trade band baj jayi Every guy in your infant industries Will import. No trade barriers will be. Then who from the infant industry?

[01:12:27]Will you buy it? Infant industry commit a little These big firms can import In the international market. The Need to Control inflation This is the infant industry argument.

[01:12:38]Protection is necessary. If you have an infant The industry has to be protected. Otherwise the same The thing is. Then if you do free trade then no one will do it with them.

[01:12:42]Will not buy. Everyone will import because Imports will be cheaper. Answer Will of 29 B.A.

[01:12:48]Question Number 30 Country x and y form a customs union.

[01:12:55]What is a customs union?

[01:12:58]ABC will trade freely among themselves. Any There will be no trade barrier. and if from D If you trade then common external There will be a tariff. Everyone will impose the same tariff. all beans Tariff will be imposed on D. Free Trade If it was an area then the same tariff would have been imposed on D.

[01:13:11]Not required. But the Customs Union says that if you together create a free trade area It has been made neither by any non-member country If you trade, the tariff will be the same for everyone.

[01:13:20]Will apply on D. If there was a free trade area No, this is like imposing the same tariff on D.

[01:13:24]There is no need. Plant them all separately. The Diagram shows the effect. ok sorry country X&W form a customs union which Leads to a Removal of Tariff. The Diagram Shows the effect on the market for wheat in Country X. Ok?

[01:13:38]How Much Wheat Is Imported in Country X From Country and Before and After the Custom Union. Now watch Before the Union, so terrible.

[01:13:44]will be. Now when there was tariff, domestic supply Because look, this is domestic supply.

[01:13:50]Which is called DS and this is domestic There is a demand which is called DD, for which you People misinterpret this every time.

[01:13:58]Domestic demand, so this is your quantity.

[01:14:01]Supply this is your domestic quantity Demanded, so obviously this domestic There is a shortage but the imports are before the Before the Customs Union, now tariff to remove Trade creation is done, tariff is being imposed Removal means trade creation is taking place Is. So now the price has reduced. Price Low This means that domestic demand is now has increased and domestic supply is now low.

[01:14:22]Has been. That's right. So now imports have increased.

[01:14:25]Obviously imports will increase. Trade Creation It is happening. So first the imports were LM and now Import is kn. LM is being imported first Was. Now KN is being imported because Domestic shortage has increased. So first Trade was taking place LM Now Trading KN So D will be the answer.

[01:14:49]Correct?

[01:14:56]This paper was technical. This is really technical It was a paper.

[01:15:00]The kids were right.

[01:15:03]23 out of 30 is A. crash hold then Look, okay. Then 20 out of 30 is on B.

[01:15:12]18 out of 30 is C.

[01:15:16]16 out of 30 is paid.

[01:15:21]14 out of 30 is E.

[01:15:24]And below 14 is a you that you don't bring Is.