ECONOMICS
Paper – II
Note : This paper contains fifty (50) objective type questions of two (2) marks each. All questions are compulsory.
1. Which is called Gossen’s second law ?
(A) Law of Equi-marginal Utility
(B) Law of Diminishing Marginal Utility
(C) Revealed Preference Theory
(D) Indifference Curve Approach
2. When a consumer is in equilibrium, MRSXY is 2.5. If the price of commodity Y is 16, then what will be the price of commodity X ?
(A) 40
(B) 6.4
(C) 23.2
(D) 24
3. Which of the conditions support long run equilibrium in monopolistic competition ?
(A) MR = MC, AR = AC
(B) P = MC, AR = AC
(C) MR = MC = AR = AC
(D) AR = MC = AC
4. Who explained importance of time element in price determination, for the first time ?
(A) Chamberlin
(B) Stigler
(C) Mrs. Joan Robinson
(D) Marshall
5. Law of diminishing returns begins to operate when :
(A) Total product begins to rise.
(B) Total product begins to fall.
(C) Marginal product begins to rise.
(D) Marginal product begins to fall.
6. Consider the following statements regarding Edgeworth Duopoly model :
I. It takes as given output decision of rival.
II. It takes as given price decision of rival.
III. It is an explanation of price rigidity.
Of these, the correct answer is :
(A) Only Statement I is true.
(B) Both I & II are true.
(C) Both II & III are true.
(D) Only III is true.
7. Public goods are characterised by
1. Collective consumption
2. Divisibility
3. Non-exclusion
4. Rival consumption
Select the correct answer from the code given below :
Codes :
(A) 1 & 2 are correct.
(B) 1 & 3 are correct.
(C) 1 & 4 are correct.
(D) 2 & 4 are correct.
8. Among the following what causes market failure ?
1. Externality
2. Asymmetry of information
3. Perfect competition
Choose the correct answer from the code given below :
Codes :
(A) 1, 2 & 3 are correct.
(B) Only 1 is correct.
(C) 1 & 2 are correct.
(D) 2 & 3 are correct.
9. Assuming wage-price flexibility, the classical economists asserted that a decline in money wages and price would lead to
(A) Unemployment
(B) Deflation
(C) High level of employment and output
(D) Unemployment and decline in output
10. The classical theory of interest postulates that both savings and investments are a function of
(A) the level of National income
(B) the level of employment and output
(C) monetary and fiscal policy
(D) rate of interest
11. The relative income hypothesis of Duesenberry suggests that as income increases, consumption function curve shifts above and therefore,
(A) Average propensity to consume rises.
(B) Average propensity to consume falls.
(C) Average propensity to consume remains constant.
(D) Average propensity to consume is equal to 1.
12. Who among the following said, “Inflation is everywhere and always a monetary phenomenon” ?
(A) James Tobin
(B) John M. Keynes
(C) Milton Friedman
(D) Anna J. Schwartz
13. Accelerator is most closely related to
(A) interest rate
(B) inventories
(C) idle capacity
(D) induced investment
14. Match List – I and List – II and select the correct answer from the codes given below :
15. Which one of the following would be inconsistent with the Keynesian view about the effectiveness of monetary policy ?
(A) Velocity of money is relatively stable.
(B) The demand for money is unstable.
(C) The demand for money is interest sensitive.
(D) Investment demand is unstable.
16. Which of the following statement is true ?
(A) Sporadic dumping is selling of goods at a low price in the foreign market to get rid of the inventory stocks.
(B) Predatory dumping is destroying of competitors even at a loss initially and then, after eliminating of competitors, selling product at a high price.
(C) Persistent dumping is selling a product at a lower price in foreign markets due to differences in elasticity of demand at home and in the foreign market.
(D) All the above.
17. According to Comparative Advantage Theory, International Trade will not take place if
(A) one country is efficient in the production of both the products.
(B) one country is inefficient in the production of both the products.
(C) opportunity costs of the two products are same in both the countries.
(D) None of the above.
18. Imposition of tariff will lead to
(A) Deterioration in terms of trade
(B) Improvement in terms of trade
(C) No effect on terms of trade
(D) None of the above
19. Under a freely exchange rate system, a deficit in a Nation’s Balance of Payments Account is automatically corrected by
(A) a depreciation of its currency
(B) an appreciation of its currency
(C) domestic inflation
(D) deflation and rise in National income
20. Maastricht Treaty led to the creation of which one of the following ?
(A) European Parliament
(B) Euro
(C) European Court of Justice
(D) European Union
21. Assertion (A) : According to Mundell, “Imbalances in the balance of payments is caused by initial differences in unit factor costs.”
Reason (R) : Free movement of goods will correct the imbalance in the balance of payments of two countries.
In the context of the two statements, which one of the following is correct ?
Codes :
(A) Both (A) and (R) are true and (R) is the correct explanation of (A).
(B) Both (A) and (R) are true and (R) is not the correct explanation of (A).
(C) (A) is true, but (R) is false.
(D) (A) is false, but (R) is true.
22. The Stolper-Samuelson theorem postulates that the imposition of a tariff by a nation causes the real income of the nation’s
(A) abundant factor to rise
(B) scarce factor to rise
(C) scarce factor to fall
(D) both (A) & (B) are possible
23. What is perspective planning ?
(A) Overall appraisal of planning.
(B) Review of planning in different fields.
(C) Taking up past experience and reviewing the future in that light.
(D) Planning for future so as to meet the long term requirement of development in the country.
24. Who formulated the ‘People’s Plan’ for India in 1944 ?
(A) J.L. Nehru
(B) M.N. Roy
(C) Subhas Chandra Bose
(D) Mahatma Gandhi
25. “Trickle down” strategy implies
(A) growing GNP taking care of poverty.
(B) reduction in the income of the upper class by deliberate redistribution.
(C) direct achievement of better nourishment, health, education, etc. instead of growth of GNP first.
(D) to target a particular sector of economy for betterment.
26. What is the correct sequence of the following approaches to development in terms of their chronological emergency ?
1. Basic needs approach
2. Per capita income approach
3. Human Development Index approach
Choose the correct answer from the codes given below :
Codes :
(A) 1, 2, 3
(B) 2, 1, 3
(C) 2, 3, 1
(D) 1, 3, 2
27. Choose the correct statements for economic development and answer from the code below :
Statements : I. Continuous process
II. Short-term process
III. Long-term process
Codes :
(A) II only
(B) I and III
(C) III only
(D) I and II
28. Which of the following economists are proponents of dependency theory of development ?
Choose from the code below :
I. Ragnar Nurkse
II. Andre Gunther Frank
III. Raul Prebisch
IV. John Kenneth Galbraith
Codes :
(A) I, II and III are correct.
(B) II and III are correct.
(C) II, III and IV are correct.
(D) III and IV are correct.
29. What is true for neo-classical growth models ?
I. Rate of interest and profit are flexible.
II. Capital is heterogeneous.
III. Perfect competition prevails.
IV. Capital and labour are substitutable.
Choose the correct answer from the codes given below :
Codes :
(A) Only I, II and III are true.
(B) Only II and III are true.
(C) Only I, III and IV are true.
(D) All the above are true.
30. Choose the top three trading partners of India in 2013-14 :
I. UAE
II. Korea
III. China
IV. USA
Choose the correct answer from codes given below :
Codes :
(A) I, II, III
(B) II, III, IV
(C) I, III, IV
(D) II, I, IV
31. Of the following, which combination of two deficits is most significant for the Indian economy ?
(A) Fiscal deficit and Revenue deficit
(B) Revenue deficit and Primary deficit
(C) Budget deficit and Fiscal deficit
(D) Current Account deficit and Fiscal deficit
32. Of the following, which sector witnessed the highest growth rate in year 2013-14 ?
(A) Agriculture, forestry and fishery
(B) Mining and quarrying
(C) Manufacturing
(D) Construction
33. Who has advocated the concept of PURA (Providing Urban Amenities in Rural Areas) for our country ?
(A) A.P.J. Abdul Kalam
(B) Manmohan Singh
(C) Charan Singh
(D) None of the above
34. ECOMARC is a symbol related to
(A) Export Goods
(B) Import Goods
(C) Goods Safe for Environment
(D) Best Quality Goods
35. Arrange following countries as per their HDI rank in the descending order (on the basis of 2013, UNDP Report on Human Development) :
1. Vietnam
2. China
3. India
4. Sri Lanka
Choose the correct answer from the codes given below :
Codes :
(A) 4, 2, 1, 3
(B) 2, 1, 4, 3
(C) 2, 4, 3, 1
(D) 1, 2, 3, 4
36. Consider the following export groups from India for the year 2013-14 :
1. Agri. and allied products
2. Engineering goods
3. Gems and Jewellery
4. Textile and Readymade Garments
Arrange them in descending order of magnitude as a percent to total exports.
(A) 2, 1, 4, 3
(B) 2, 1, 3, 4
(C) 4, 2, 1, 3
(D) 3, 4, 2, 1
37. Techniques used to encourage the production and consumption of goods that generate positive externalities are referred to as
(A) Tax incentives and vouchers
(B) Fees and fines
(C) Taxes and charges
(D) Special assessment
38. Which of the canons of taxations have been propounded by Adam Smith ?
(A) Economy, Elasticity, Simplicity and Sufficiency
(B) Equity, Certainty, Convenience and Economy
(C) Certainty, Convenience, Economy and Elasticity
(D) Economy, Coordination, Convenience and Expediency
39. Displacement effect explained in Peacock-Wiseman hypothesis implies :
(A) An upward displacement of public expenditure according to higher economic growth
(B) The movement from older level of public expenditure and taxation to a newer and higher level
(C) Public expenditure increases at steady rate and reaches higher level
(D) Government undertakes more and more newer activities and hence public expenditure rises steeply upwards
40. The most important characteristic of a federation is :
(A) Perfect match between the functions and resources of the Central and State Governments
(B) Non-correspondence between the functions and resources of the Central and State Governments
(C) Centre’s supremacy over the States
(D) None of the above
41. Fiscal consolidation at the Centre can be achieved by :
(A) Rationalization of major subsidies alone
(B) Reducing the defence expenditure only
(C) Raising the tax-GDP ratio and rationalisation of subsidies
(D) Minimising the Central assistance to the States
42. Arrange the following Reports in chronological order :
I. Direct Taxes Enquiry Committee, Final Report
II. Final Report on Rationalising and Simplifications of the Tax Structure
III. Indian Tax Reforms – Report of a Survey
IV. Taxation Enquiry Commission
Choose the correct answer from the codes given below :
Codes :
(A) IV, III, II, I
(B) I, II, III, IV
(C) III, I, IV, II
(D) II, III, I, IV
43. Identify correctly the taxes in State List (List – II) of the Constitution of India :
I. Taxes on mineral rights
II. Taxes on luxuries
III. Rates of stamp duty in respect of bills of exchange, cheques and promissory notes
IV. Excise duties on tobacco
Choose the right answer from the codes given below :
Codes :
(A) I and III are correct.
(B) I and II are correct.
(C) I, III and IV are correct.
(D) II, III and IV are correct.
44. Lump sum grant means :
(A) A grant whose amount is sufficient to meet the expenditure.
(B) A matching and conditional grant.
(C) Grant given for a special purpose and it can be utilised only for that purpose.
(D) A grant whose amount is not dependent on any matching effort of the recipient.
45. Geometric mean of Laspeyre’s and Paasche’s indices provides :
(A) Marshall-Edgeworth Index
(B) Bowley’s Index
(C) Fisher’s Index
(D) Kelley’s Index
46. Assertion (A) : Moving averages method can be used to estimate trend in time series.
Reasoning (R) : Moving averages is a device to smoothen the fluctuations in time series.
Choose the correct answer from the codes given below :
Codes :
(A) Both (A) and (R) are correct and (R) is a correct explanation of (A).
(B) Both (A) and (R) are correct, but (R) is not a correct explanation of (A).
(C) (A) is correct, but (R) is incorrect.
(D) (R) is correct, but (A) is incorrect.
47. Which one of the following denotes the power of the Test ? [a is probability of Type I error and b is probability of Type II error]
(A) a
(B) b
(C) 1 – a
(D) 1 – b
48. In a frequency distribution the standard deviation of which is 15.8, the value of median is more than mean by 4, what will be its coefficient of skewness ?
(A) – 0.76
(B) + 0.76
(C) – 0.86
(D) + 0.86
49. Three coins are tossed simultaneously. What is the probability that they will fall 2 heads and 1 tail ?
(A) 1/2
(B) 1/4
(C) 3/4
(D) 3/8
50. In a frequency distribution if each item is multiplied by 5, the coefficient of variation will remain
(A) unchanged
(B) will be multiplied by 5
(C) will be multiplied by 25
(D) will be multiplied by 1/5
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