KSLU Solved Question Papers
Money, Banking and International Trade
Previous Year Question Paper with Solution
B.A. LL.B. (Five Years) · Sem 2
2021 Oct Examination
munotes.in
Mumbai
B.A. LL.B. (Five Years) Sem 2 Money, Banking and International Trade 2021 Oct Question Paper with Solutions
First published on munotes.in on 21 October 2026.
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The question paper reproduced here is the paper as set by Karnataka State Law University at the 2021 Oct examination.
Contents
The questions below are the paper as Karnataka State Law University set it at the 2021 Oct examination, in the order it was set.
MarksPage
MarksPage
The Paper as Set
The questions in this volume are the questions asked at the 2021 Oct examination, reproduced as Karnataka State Law University set them, in the order it set them. Long reading passages are shortened to their first and last lines and our summary; the original paper prints them in full. Only the answers are ours. See the original question paper.
Duration 3 hours · Total marks 80 · 20 questions answered
How to use this volume
Solve the paper first, under exam conditions and against the clock. Then read the answers here and mark your own. Reading a solution before attempting the question feels productive and teaches very little, because recognising an answer is not the same as being able to write one.
Q1
(a)Define index numbers. Explain the steps in constructing index numbers.[10]
Answer
For full marks, cover: a definition of index numbers and what they are used for; the steps in constructing one, each applied to a single running example (a cost of living index for students living in a college hostel) so that every decision is shown; the computation by the weighted average of price relatives; fixed base and chain base compared in figures; the cautions each step carries; a conclusion.
Definition
Index numbers are statistical measures that show the average relative change in a group of related variables, such as prices, over time or between places. The value in a chosen base period is taken as 100. An index of 113 means a rise of 13 per cent since the base. Index numbers are used to measure inflation, the value of money, the cost of living and changes in output.
The steps, applied to one example
Suppose a students' union wants to know how much the cost of living of hostel students has risen since 2024.
Step 1: Fix the purpose. The index will measure the change in the cost of living of students in the college hostel. The purpose decides which goods, which prices and which weights to use. An index for farm labourers would need a quite different basket.
Step 2: Choose the base period. The union picks 2024. It was a normal year, with no strike, closure or unusual price jump. A base year that is abnormal distorts every later figure.
Step 3: Select the items. A survey shows what hostel students spend on. The basket chosen is mess food, room rent, local transport, books and stationery, and mobile data. The items must be representative, of standard quality and easy to price.
Step 4: Collect prices. Prices are taken from the actual mess, hostel office, bus routes, bookshops and telecom plans that students use, for 2024 and 2026.
Step 5: Fix the weights. Items matter in proportion to spending. The survey shows how students spend each 100 rupees. They spend 50 on food, 25 on rent, 10 on transport, 10 on books and 5 on data.
Step 6: Choose the method of averaging. The union uses the weighted arithmetic mean of price relatives. A price relative is (current price / base price) x 100.
Step 7: Compute the index.
| Item | Weight (W) | Price relative 2026 (P) | P x W |
|---|---|---|---|
| Mess food | 50 | 120 | 6,000 |
| Room rent | 25 | 110 | 2,750 |
| Transport | 10 | 105 | 1,050 |
| Books and stationery | 10 | 108 | 1,080 |
| Mobile data | 5 | 90 | 450 |
| Total | 100 | 11,330 |
Index = Sum of PW / Sum of W = 11,330 / 100 = 113.3
Step 8: Interpret. The cost of living of hostel students rose by about 13.3 per cent between 2024 and 2026. Food, with half the weight, drove most of it. Mobile data became cheaper, which pulled the index down a little. Without weights, a simple average of the five relatives would be 106.6. That badly understates the rise, because it treats data as being as important as food.
The same steps in India's official CPI
| Step | Hostel index | India's CPI (new series) |
|---|---|---|
| Base | 2024 | 2024 = 100, released from February 2026 |
| Items | 5 | 358 |
| Prices from | Mess, hostel, shops used | 1,465 rural and 1,395 urban markets |
| Weights from | Union survey | Household Consumption Expenditure Survey 2023-24 |
| Weight of food | 50 per cent | 36.75 per cent |
The difference in food weight shows why purpose matters. In this example, hostel students spend a larger share on food than the average Indian household now does.
Fixed base and chain base
The union could also compare each year with the previous year, the chain base method.
| 2024 | 2025 | 2026 | |
|---|---|---|---|
| Link relative (on the previous year) | 100 | 106 | 107 |
| Chain index (2024 = 100) | 100 | 106 | 106 x 107 / 100 = 113.4 |
The chain index of 113.4 is close to the fixed base figure of 113.3. The chain method lets new items and weights be brought in each year. The fixed base method keeps one basket and is simpler to explain.
Cautions at each step
- Purpose: an index built for one group misleads when applied to another.
- Base: an abnormal base exaggerates or hides change. India moved its CPI to 2024 = 100 in 2026 for this reason.
- Items: new goods and quality changes are hard to include.
- Prices: they must come from where the group really buys.
- Weights: they age as spending habits change.
- Formula: different formulas give somewhat different answers; Fisher's ideal formula meets the formal tests best.
Conclusion. An index number measures average relative change against a base of 100. It is constructed in steps. Fix the purpose, choose a normal base and select representative items. Then collect the right prices, fix weights, choose the averaging method, compute and interpret. The hostel example shows each step as a real decision. The weighted index of 113.3 tells a truer story than an unweighted average, and chaining the years gives almost the same result.
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