KSLU Solved Question Papers
Money, Banking and International Trade
Previous Year Question Paper with Solution
B.A. LL.B. (Five Years) · Sem 2
2022 Oct Examination
munotes.in
Mumbai
B.A. LL.B. (Five Years) Sem 2 Money, Banking and International Trade 2022 Oct Question Paper with Solutions
First published on munotes.in on 21 October 2026.
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Contents
The questions below are the paper as Karnataka State Law University set it at the 2022 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 2022 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
Instructions printed on the paper
- N.B. (1) Answer all five Units. (2) One essay type and short note is compulsory from each Unit. (3) Figures to the right indicate marks. (4) Answer should be written either in English or Kannada.
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
Unit I
(a)What is index number ? Explain its uses.[10]
Answer
For full marks, cover: the meaning of an index number with a short definition and its features; its uses arranged by the operation they perform (measuring the value of money, deflating money figures into real ones, indexing payments, guiding policy, comparing places and groups, guiding business and investment), each shown with a worked figure and an Indian example; the cautions in using index numbers; a conclusion.
What is an index number?
An index number is a statistical measure of the average change in a group of related variables, such as prices or output. The change may be over time or between places. The value in a chosen base period is set at 100, and later values are expressed relative to it.
If a basket of goods cost 40,000 rupees in the base year and 46,000 rupees now, the price index is (46,000 / 40,000) x 100 = 115. Prices have risen by 15 per cent on average.
Features. It is expressed in percentages and measures relative, not absolute, change. It is an average of many changes, and it always refers to a base.
Uses of index numbers
1. Measuring the value of money. The value of money moves inversely to prices. With a price index of 115, the value of a rupee is 100 / 115, about 87 paise of its base year value. Index numbers are the only practical way to measure the purchasing power of money.
2. Deflating money figures into real figures. Money incomes and output rise partly because prices rise. An index number separates the two.
Worked figure. A worker's monthly wage rises from 30,000 to 36,000 rupees, a rise of 20 per cent. Over the same period the consumer price index rises from 100 to 125. The real wage is 36,000 x 100 / 125 = 28,800 rupees at base year prices. The worker is in fact 4 per cent worse off. National income is deflated in the same way, by a price index called the GDP deflator.
3. Indexing payments to protect them from inflation.
- Dearness allowance of government employees and pensioners is revised in line with a consumer price index.
- Wage agreements in industry often link wages to an index.
- Tax law uses the Cost Inflation Index. Its base is 2001-02 = 100, and the figure notified for 2025-26 is 376.
Worked figure. Land bought in 2001-02 for 20 lakh rupees and sold in 2025-26 has an indexed cost of 20 lakh x 376 / 100 = 75.2 lakh rupees. Only the gain above that indexed cost is a real gain.
4. Guiding economic policy.
- The RBI's inflation target of 4 per cent, under section 45ZA of the RBI Act, is defined in terms of the Consumer Price Index. Every repo rate decision starts from that index.
- The Wholesale Price Index tracks prices at the producer level and gives early warning of cost pressures.
- The Index of Industrial Production shows whether industry is growing or slowing.
5. Comparing places, groups and periods. Separate consumer price indices for rural and urban areas show where the cost of living rises faster. Comparisons over time show long-run trends that raw prices would hide.
6. Measuring trade and its terms. Export and import price indices give the terms of trade, the rate at which exports exchange for imports. Volume indices show whether a country is selling more goods abroad, not merely at higher prices. Together they tell whether trade is earning the country more real imports.
7. Guiding business and investment. Firms use price and production indices to forecast demand and set prices. Investors judge the stock market as a whole through share price indices.
Uses at a glance
| Use | Operation | Indian example |
|---|---|---|
| Value of money | 100 / price index | Purchasing power of the rupee |
| Real income | Money figure x 100 / index | Real wages, real GDP |
| Indexation | Adjust payment by index | Dearness allowance; Cost Inflation Index |
| Policy | Track and target | CPI target of 4 per cent; WPI; IIP |
| Comparison | Places and groups | Rural and urban CPI |
| Business | Forecast and benchmark | Price setting; share indices |
Cautions in using index numbers
- The base must be normal. A base year with unusual prices distorts every later figure. India therefore revises bases: the CPI moved to 2024 = 100 from February 2026.
- The basket must fit the group. An index for city workers misstates the cost of living of farm labourers.
- Averages hide differences. A 5 per cent average rise may conceal a 20 per cent rise in food.
- Quality changes are hard to measure.
Conclusion. An index number measures average change against a base of 100. Its uses are to measure the value of money and to deflate money figures into real ones. It also indexes wages, pensions and tax computations, guides monetary and economic policy, compares places and groups, and helps business and investors. The worked figures show how much a single index can change a judgment. A pay rise can turn out to be a cut, and a capital gain can be mostly inflation. Used with care about base, basket and averages, index numbers are indispensable.
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