ECONOMICS
PAPER – III
Note : This paper contains seventy five (75) objective type questions of two (2) marks each. All questions are compulsory.
1. Consider the following diagram showing the market demand and supply curves for a commodity. If the government fixes the price P1 above the market clearing price P0, then the dead-weight loss is represented by :
(1) Area of triangle ABE
(2) Area of triangle EBC
(3) Area of triangle ABE+area of triangle EBC
(4) Area of rectangle P1A BP0
2. Which of the following features belong to Cournots’ model of duopoly ?
(a) It yields determinate and stable equilibrium for the duopolists
(b) It is an adequate representation of Nash equilibrium
(c) If the duopolists combine to form a monopoly, the price changed by them will be less than the equilibrium price without their combining together.
Of the above which statements are true ? Choose from the code below :
(1) All the above are correct
(2) (a) and (c) are correct
(3) (a) and (b) are correct
(4) (b) and (c) are correct
3. A good is called a ‘Giffen good’ when the income effect is :
(1) positive and is greater than the substitution effect
(2) Equal to substitution effect
(3) Less than the substitution effect
(4) Negative and is greater than the substitution effect
4. Movement from an inefficient allocation to an efficient allocation in the Edgeworth Box will :
(1) increase the utility of all individuals
(2) increase the utility of at least one individual, but may decrease the level of utility of another person
(3) increase the utility of one individual, but cannot decrease the utility of any individual
(4) decrease the utility of all individuals
5. In explaining the price effect, which of the following is/are constant ?
(a) Real Income
(b) Money Income
(c) Price ratio
Choose the correct answer from the code given below :
Code :
(1) Only (a)
(2) Only (b)
(3) Both (b) and (c)
(4) Both (a) and (c)
6. Which of the following is a problem connected with general equilibrium analysis ?
(1) Existence problem
(2) Uniqueness problem
(3) Stability problem
(4) All of the above
7. In the adjacent diagrams 1 and 2, the demand curve DD and supply curve SS are shown. Point E and F represent the equilibrium points. Then which of the following is correct ?
(1) Both points E and F are the points of stable equilibrium
(2) Both points E and F are points of unstable equilibrium
(3) Equilibrium is stable at point E and unstable at point F
(4) Equilibrium is unstable at point E and stable at point F
8. Which of the following statements about Pareto Optimum are correct ?
(a) It changes with changes in the distribution of income
(b) At the Pareto optimum, MRS in consumption=MRT in production
(c) It is not unique
(d) It is obtained under perfect competition
Code :
(1) (a), (c) and (d)
(2) (b) and (c)
(3) (a), (b) and (d)
(4) (a) and (b)
9. Market prices adjusted to consider differences between social cost – benefit and private costbenefit calculations are :
(1) Consumer Surplus
(2) Price distribution
(3) Exchange rate
(4) Shadow prices
10. ‘Bandwagon Effect’ is found in which of the following ?
(1) Life cycle hypothesis
(2) Permanent income hypothesis
(3) Absolute income hypothesis
(4) Relative income hypothesis
11. Consider the following statements :
(a) Phillips curve is an inverse relationship between the rate of unemployment and the rate of inflation in an economy
(b) Engel’s Law observes that as income rises the proportion of income spent on food falls even if the actual expenditure on food rises
Which of the above statement(s) is/are correct ?
(1) Only (a)
(2) Only (b)
(3) Both (a) and (b)
(4) Neither (a) nor (b)
12. Which amongst the following is not well matched ?
Concept Economists
(1) Dual decision hypothesis R.W. Clower
(2) Natural rate of unemployment E. Phelps and M. Friedman
(3) Limit Price Theory J. Bhagwati
(4) Planned sales curve Mrs. J. Robinson
13. Which amongst the following is correct for the aggregate demand function shown in the diagram ?
Choose the answer from the code below :
(1) (a) and (d) are correct
(2) (a) and (c) are correct
(3) (b) and (c) are correct
(4) (b) and (d) are correct
14. Permanent income hypothesis assumes positive correlation between which of the following pairs of variables ?
(1) Permanent income and transitory income
(2) Permanent income and transitory consumption
(3) Permanent income and permanent consumption
(4) Transitory income and transitory consumption
15. Which of the following would be the initial impact on an economy if wages were to increase more than workers productivity ?
(1) Employment would increase, causing a rightward shift in the aggregate demand curve
(2) The aggregate demand curve would shift to the left, increasing the price level
(3) The short – run aggregate supply curve would shift to the left, increasing the price level
4) Employment would decrease, causing a rightward shift in the aggregate demand curve
16. Consider the following statements describing the relationship between marginal propensity to consume (m.p.c) and the value of the multiplier :
(a) Higher the m.p.c lower is the value of multiplier
(b) Higher the m.p.c higher is the value of multiplier
(c) If m.p.c=1, value of multiplier will be ∞
Which of the above statements is/are correct ?
(1) (b) alone
(2) (b) and (c)
(3) (c) alone
(4) (a) alone
17. Match List – I and List – II and select the correct answer from the code given below :
18. ‘Golden rule of accumulation’ refers to the savings rate that :
(1) maximises the growth rate of output
(2) optimises the investment in the economy
(3) maximises the growing per capita consumption
(4) None of the above
19. Which amongst the following statements are true for Schumpeter model of development ?
(a) Development is possible because of credit creation by Banks
(b) Development flourishes in democracy
(c) Capitalist economy develops through trade cycles
Of the above which statements are correct ? Answer from the code below :
(1) All the above are true
(2) (a) and (b) are true
(3) (b) and (c) are true
(4) (a) and (c) are true
20. In Marxian model, the rate of profit on capital is :
(1) Directly proportional to rate of exploitation as well as organic composition of capital
(2) Inversely proportional to rate of exploitation and organic composition of capital
(3) Inversely proportional to rate of exploitation and directly proportional to organic composition of capital
(4) Directly proportional to rate of exploitation and inversely proportional to organic composition of capital
21. Which of the following is/are true for AK model of growth ?
(a) It assumes constant savings rate
(b) This savings rate is exogeneously determined
(c) The marginal product of capital is diminishing as output expands
Of the above which statements are correct ?
(1) All the three above are correct
(2) Only (a) and (b) are correct
(3) (a) and (c) are correct
(4) Only (b) and (c) are correct
22. According to Fisher – Clark thesis which one of the following is the correct sequence of structural shift in the process of development ?
(1) Agriculture, Services, Industry
(2) Agriculture, Industry, Services
(3) Agriculture, Industry, Foreign trade
(4) Agriculture, Foreign trade, Services
23. Hagen’s theory of social change uses psychology, sociology and anthropology to explain how a traditional agricultural society :
(1) attains continuing technical progress
(2) learns to accept its fate
(3) has a social structure where high status is maintained
(4) produces an accommodating personality with a high need for achievement
24. According to Lewis model, the dual economy grows, only when :
(1) Modern sector increases its output share relative to the traditional sector
(2) agriculture sector uses modern equipment
(3) agriculture sector hires labour economically
(4) modern manufacturing sector is capital intensive
25. One of the dependency theorists, Andre Gunder Frank suggests that the following economic activities have contributed to under development :
(a) Workers migrating from villages to foreign – dominated urban complexes
(b) Forming an unskilled labour force to work in factories and mines and on plantations
(c) Replacing indigenous entreprises with technologically more advanced, global, subsidiary companies
(d) Closing the economy to trade with and investment from developed countries
Choose the answer from the code given below :
(1) (a) and (b)
(2) (b) and (c)
(3) (a), (b) and (c)
(4) (a), (b), (c) and (d)
26. If in a Harrodian economy, Ga=10% and Gw=8%, this will lead to :
(1) Inflation
(2) Unemployment
(3) Deflation
(4) Stagflation
27. Match List – I and List – II and select the correct answer from the code given below :
28. The ‘twin deficit’ problem means a country having :
(1) High fiscal deficit and high current account deficit
(2) High fiscal deficit and high revenue deficit
(3) High fiscal deficit and high governance deficit
(4) High fiscal deficit and high primary deficit
29. MNCs can help the developing countries to:
(a) Obtain foreign technology and innovative methods of increasing productivity
(b) Employ rural unemployed labour
(c) Finance a savings gap or balance of payments deficit
(d) Generate appropriate technology by adapting existing processes
Choose the correct answer from the code given below :
(1) (a) and (c) only
(2) (b) and (c) only
(3) (a), (c) and (d) only
(4) (a), (b), (c) and (d)
30. Which of the following is not part of the W.T.O. Agreement On Agriculture (AOA) ?
(1) Input subsidies
(2) Export subsidies
(3) Domestic support
(4) Market Access
31. In the context of US economy, which one of the following is true for ‘Triffin dilemma’ ?
(a) US has to support a large supply of dollars to act as an internationally accepted currency.
(b) There is a conflict in the short run domestic and long run objective of US trade policy resulting in trade deficit.
Which of the above statements are true ? Choose from the code given below :
(1) Both (a) and (b) are true
(2) Neither (a) nor (b) are true
(3) Only (a) is true
(4) Only (b) is true
32. Which of the following does not form part of the foreign exchange reserves of India ?
(1) Gold
(2) SDRs
(3) Foreign currency assets
(4) Foreign currency and securities held by the banks and corporate bodies
33. The Regional Comprehensive Economic Partnership (RCEP) is a proposed free trade agreement between the members of :
(1) SAARC
(2) ASEAN
(3) BRICS
(4) EUROPEAN UNION
34. Match List – I (Concepts) and List – II (Economists) and select the correct answer using the code given below :
35. The presence of increasing returns to scale in an industry leads to :
(1) discouraging producers from exporting
(2) give a comparative advantage in that industry to large countries
(3) make that industry perfectly competitive
(4) cause price in that industry to rise with output
36. Hedging in the foreign exchange market refers to :
(1) An act of devaluation
(2) Covering a risk of fluctuations in the foreign exchange rates in future
(3) Not covering a risk of fluctuations in the foreign exchange rates in future
(4) An act of revaluation
37. Arrange the following acts in the order in which they came into force :
(a) Competition Act
(b) Foreign Exchange Management Act
(c) Consumer Protection Act
(d) The Factories Act
Choose the answer from the code below :
(1) (b), (a), (d), (c)
(2) (d), (b), (c), (a)
(3) (d), (c), (b), (a)
(4) (c), (d), (b), (a)
38. Match the following lists :
39. Arrange the following sectors in the ascending order on the basis of their weight in the Index of Industrial production (IIP) with base year 2011 – 12. Answer from the code below :
(a) Electricity
(b) Manufacturing
(c) Mining
Code :
(1) (c), (b) and (a)
(2) (a), (c) and (b)
(3) (b), (a) and (c)
(4) (a), (b) and (c)
40. For a financial asset, which of the following is/are correct in relation to rate of return and the yield from it ?
(a) Rate of return is retrospective while the yield is prospective
(b) Rate of return does not include capital gains while the yield includes capital gains.
Choose the answer from the code below :
(1) Both (a) and (b) are correct
(2) Neither (a) nor (b) is correct
(3) Only (a) is correct
(4) Only (b) is correct
41. When the Reserve Bank of India announces an increase of the Cash Reserve Ratio, what does it mean ?
(1) The commercial Banks will have less money to lend
(2) The Reserve Bank of India will have less money to lend
(3) The Union Government will have less money to lend
(4) The commercial Banks will have more money to lend
42. Core inflation has been described as :
(1) Headline inflation−food inflation
(2) Headline inflation−(food inflation+fuel inflation)
(3) Headline inflation−fuel inflation
(4) Food inflation+Fuel inflation
43. According to T.W. Schultz, which of the following statements/are true ?
(a) Farmers in developing countries are unresponsive to government set agricultural prices
(b) Farmers in developing countries are willing to innovate and adopt new methods of cultivation
Choose the correct answer from the code given below :
(1) Both (a) and (b) are true
(2) Neither (a) nor (b) is true
(3) Only (a) is true
(4) Only (b) is true
44. The government levying taxes on Polluters or charging a surcharge for pesticide use means :
(1) Internalization of negative spill over effects
(2) Marginal abatement cost
(3) Examples of a free rider
(4) Examples of Coase’s theorem
45. Assuming an agricultural growth rate of 4% per annum in India, what will be its contribution to the country’s GDP growth rate with a 20% contribution of the agricultural sector to GDP ?
(1) 8%
(2) 5%
(3) 2 %
(4) 0.8 %
46. Optimum population will be at a point where :
(1) National income is maximum
(2) Per capita income is maximum
(3) Population is maximum
(4) Per capita consumption is maximum
47. Who amongst the following made the following statement ?
“The Table of nature is laid for the few. Those who come uninvited will starve”.
(1) Julius Simon
(2) E. Boserup
(3) T.W. Malthus
(4) H. Dalton
48. Which of the following is not part of a life – table ?
(1) It shows age – specific death rate
(2) Age – specific life expectancy can be estimated
(3) Probability of surviving at particular year of age can be estimated
(4) Age – specific birth rate can be estimated
49. Consider the following data pertaining to India as per NFHS – 4 and Match List – I with List – II. Select the correct answer from the code given below :
50. Rank the following states in descending order according to sex ratio as per census 2011 :
(a) Madhya Pradesh
(b) Punjab
(c) U.P
(d) Bihar
Code :
(1) (a), (c), (d), (b)
(2) (b), (a), (c), (d)
(3) (a), (b), (c), (d)
(4) (c), (d), (b), (a)
51. Pollution is an example of Market failure because :
(1) The market price is less than the efficient price
(2) The market price is higher than the efficient price
(3) Property rights are poorly distributed
(4) Those who suffer from pollution are compensated outside the market
52. “For goods that are unrelated in consumption, efficiency requires that tax rates be inversely
proportional to elasticity of demand”. This is the definition of :
(1) The benefits – received principle
(2) The second best principle
(3) The inverse elasticity rule
(4) The Ramsey Rule
53. A forward – shifted tax will affect :
(1) Buyers and Sellers equally
(2) Sellers more than buyers
(3) government revenue negatively
(4) Buyers more than sellers
54. The case for progressive tax rates rests on :
(1) Benefits received
(2) Cost of service
(3) Ability to pay
(4) None of the above
55. Primary deficit is measured by :
(1) Fiscal deficit − interest payments
(2) Budget deficit − interest payments
(3) Budget deficit + total borrowings
(4) Total Revenue expenditure −total revenue receipts
56. Which one of the following is not correctly matched ?
Plan Strategy of Plan
(1) 11th Plan Inclusive growth
(2) 2nd Plan Heavy industry investment
(3) 3rd Plan Balanced growth
(4) 8th Plan Basic Needs
57. Who amongst the following economists have majorly contributed to TFP studies in Indian Context ?
(a) B.N. Golder
(b) A. Virmani
(c) D.K. Das
(d) A. Sen
Choose the correct answer from the code below :
(1) All of the above
(2) (c) and (d)
(3) (a), (b) and (c)
(4) (b) and (d)
58. Consider the following statements in relation to Gender Budgeting and answer from the code given below :
(a) ‘Gender analysis’ of the budget
(b) Preparing a separate budget for women
(c) Government of India adopted gender budgeting in 2005 – 06
Code :
(1) (a), (b) are correct
(2) (a), (c) are correct
(3) (b), (c) are correct
(4) (a), (b), (c) are correct
59. Arrange the following indices in the chronological order and answer from the code given below :
(a) Multi Dimension Poverty Index
(b) Human Poverty Index
(c) Capability Poverty Measure
(d) Human Development Index
Code :
(1) (d), (c), (b), (a)
(2) (d), (b), (c), (a)
(3) (b), (a), (d), (c)
(4) (a), (b), (c), (d)
60. Which organisation in India has been given the responsibility to monitor the progress of sustainable development goals ?
(1) Reserve Bank of India
(2) Central Statistical Office
(3) NITI Aayog
(4) National Sample Survey office
61. Which of the following does not come under Small Savings Schemes as per Government of India ?
(1) Post office deposits
(2) Public Provident Fund
(3) Jan Dhan Accounts
(4) Sukanya Samiridhi Yojana
62. Which one of the following schemes provide upto ` 2 lacs accidental death Insurance to the people in the age group of 18 – 70 years ?
(1) Atal Pension Yojna
(2) Pradhan Mantri Jeevan Jyoti Bima Yojna
(3) Pradhan Mantri Suraksha Bima Yojna
(4) Atal Jeevan Beema Yojna
Questions 63 to 66 are Assertion (A) and Reason (R) type. Key to these questions is as follows :
(1) Both (A) and (R) are true and (R) is the correct explanation of (A).
(2) Both (A) and (R) are true, but (R) is not the correct explanation of (A).
(3) (A) is true, but (R) is false.
(4) (A) is false, but (R) is true.
63. Assertion (A) : Public utilities do not opt for profit maximisation policy.
Reason (R) : It would lead to under utilization of capacity.
64. Assertion (A) : The existence of industries with increasing returns to scale create an additional opportunity to gain from trade.
Reason (R) : By specializing in a smaller number of industries, countries can produce more in each industry and the costs of production will, therefore, fall.
65. Assertion (A) : Recursive models can be suitably estimated by OLS method
Reason (R) : Recursive models satisfy Identification conditions
66. Assertion (A) : Classical macro model is decomposable into real and monetary sectors
Reason (R) : Money affects both income and employment
67. An entrepreneur’s short – run total cost function is C=q3−10q2+17q+66. If p=5 the output at which profit is maximised by this entrepreneur is :
(1) 7
(2) 6
(3) 5
(4) 2/3
68. Given the Market model with Demand and supply functions as under :
Dt= apt+b a < 0
St=Apt−1+B A > 0
The condition for stable equilibrium here will be :
(1) a < A
(2) 
(3) 
(4) 
69. The production function in Input – Output Analysis propounded by W.W. Leontief has implied the value of elasticity of substitution between inputs as :
(1) One
(2) Zero
(3) Constant
(4) Infinity
70. For a Demand Function p=16−q−0.5q2 the price elasticity of demand at q=4 is :
(1) +0.5
(2) +0.2
(3) +0.7
(4) +0.3
71. Cobb – Douglas production function Q=ALaK1−a(a>0) is not characterised by :
(1) Constant returns to scale
(2) Unit elasticity of substitution
(3) Variable elasticity of substitution
(4) Linear homogeneity
72. For samples of size greater than 30, the sampling distribution of the rank correlation coefficient is approximately which distribution :
(1) t
(2) Binomial
(3) Chi – square
(4) Normal
73. If a Durbin – Watson statistics takes value close to zero, what will be the value of first order autocorrelation coefficient ?
(1) Close to zero
(2) Close to plus one
(3) Close to minus one
(4) Close to either minus or plus one
74. What would be consequences for the OLS estimator if heteroscedasticity is present in a regression model but ignored ?
(1) it will be biased
(2) it will be inconsistent
(3) it will be inefficient
(4) All (1), (2) and (3) will be true
75. Match the following and select proper code :
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