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(a) Division of labour is not an unmixed blessing. Give one reason.

(b) Is the expenditure incurred by the state on defence regarded as productive or unproductive? Give one reason.

(c) Why is the central bank referred to as the “lender of the last resort”? 

(d) What kind of goods are X and Y if a rise in the price of X, increases the demand for Y? Give an example of such goods.

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(a) Division of labour is not an unmixed blessing because inspite of many advantages, there are certain disadvantages of specialization of labour like social evils of factory system, class-conflicts among workers etc. 

(b) The expenditure incurred by the state on defence regarded as unproductive because these expenditures do not add to the productive efficiency of the economy directly as they are in nature of consumption. 

(c) As a lender of last resort, central bank gives financial accommodation to commercial banks by rediscounting their eligible bills at the time of emergencies. 

It means central bank saves commercial banks from financial crises by providing two types of loans: 

1. Rediscounting eligible securities and exchange bills of commercial banks. 

2. By providing loans against their securities. 

(d) X and Y are substitute goods. Example: Coke and Pepsi. A rise in the price of coke will cause an increase in the demand for Pepsi and viceversa is also true.

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