ECONOMICS
Paper – III
Note : This paper contains seventy five (75) objective type questions of two (2) marks each. All questions are compulsory.
1. Which among the following is/are true for a Cartel ?
I. It aims at maximising of individual firm’s profit.
II. It decides the total output in the industry to which Cartel represents .
III. It does not fix the price at which members sell their output.
Answer from the code below :
(1) All are true.
(2) I and II are true.
(3) Only II is true.
(4) Only I and III are true.
2. Why does demand curve have a negative slope ?
I. Due to income effect only
II. Due to substitution effect
Answer from the code below :
(1) Both I and II
(2) Only I
(3) Only II
(4) Neither I nor II
3. In the entry prevention model of Bain, firms charge premium over
(1) Long period competitive price
(2) Short period competitive price
(3) Lowest average cost
(4) None of the above
4. Which among the following is not well matched ?
Goods Nature
(1) Fishing in the large lake – Non-exclusive but rival
(2) Air – Non-exclusive and non-rival
(3) Use of a light house – Rival
(4) Stock of washing machines – Exclusive
5. The slope of the production possibility curve is the
(1) marginal rate of exchange
(2) marginal rate of substitution
(3) average rate of transformation
(4) marginal rate of transformation
6. 
The gain in profit income from an increase in immigration according to this diagram is :
(1) the area BDL’L
(2) the area of WBDW’
(3) the areas WBFW’ and FDL’L together
(4) the areas WBDW’ and FDL’L together
7. The demand for rare paintings, and rare stamps etc. is explained by which among the following effect ?
(1) Snob effect
(2) Bandwagon effect
(3) Veblen effect
(4) None of the above
8. A market is said to be economically efficient if it maximises
(1) consumer surplus
(2) producer surplus
(3) aggregate of consumer and producer surplus
(4) None of the above
9. Who among the following economists are associated with the concept of Quasi rent ?
I. A. Marshal
II. J. Robinson
III. D. Ricardo
Answer from the code below :
(1) Only I and III
(2) I and II
(3) All the three
(4) Only III
10. In the adjoining diagram, which of the line represent law of returns ?
(1) OA
(2) BC
(3) DE
(4) Both (2) and (3) above
11. In the adjacent diagram, which of the following effects will alter the Aggregate Demand Curve AD ?
(1) Trade effect
(2) Liquidity effect
(3) Wealth effect
(4) All of the above
12. Match List – I with List – II :
13. 1973 oil crisis also triggered a wide spread economic crisis in USA and some European nations. In this context which statements are true ?
(1) It led to disillusionment with established policies based on Keynesian economics.
(2) There emerged a malady known as stagflation.
(3) New classical economics emerged as a challenge to Keynesian economic ideas.
(4) All of the above are true .
14. As per IS-LM framework, an increase in government expenditure will result in :
(1) increase in income and interest rate both.
(2) increase in income only.
(3) decrease in investment and interest rate both.
(4) decrease in income and interest rate both.
15. Which of the following can be considered as leakages in the force of the multiplier ?
(1) Higher propensity to import
(2) Higher marginal propensity to save
(3) Both (1) and (2) above
(4) Neither (1) nor (2) above
16. According to Robinson-Uzawa theorem, steady state growth is possible if the technical progress is :
(1) only Hicks neutral
(2) only Harrod neutral
(3) only Solow neutral
(4) Both Hicks and Harrod neutral
17. Which one of the following is not an assumption of permanent income hypothesis ?
(1) Transitory income can be both positive and negative.
(2) Permanent income depends on human and non-human wealth.
(3) Transitory consumption can be both positive and negative.
(4) Average propensity to consume is greater than marginal propensity to consume.
18. The Accelerator model predicts that changes in investment are determined by the changes in
(1) Interest
(2) Output
(3) Capital
(4) Inventory
19. Which among the following statements are true for Schumpeter’s theory of economic development ?
I. Development is evolutionary.
II. Development is financed by real savings.
III. Capitalism keeps its character intact overtime.
Of the above which statement(s) is/are true ? Answer from the code below :
Codes :
(1) Only I
(2) Only I and II
(3) All the above
(4) None of the above
20. Who among the following has not given his model based on the concept of unlimited supply of labour ?
(1) D.W. Jorgenson
(2) Ranis-Fei
(3) W.A. Lewis
(4) Gunnar Myrdal
21. Which aspect of economic development did Gunnar Myrdal concentrate upon ?
(1) Capital scarcity
(2) Human resource scarcity
(3) Regional inequalities
(4) Population exploitation
22. Fei-Ranis’s theory of economic development is based on
(1) dualistic approach to development
(2) presence of disguised unemployment
(3) importance of agricultural development
(4) All of the above
23. Andre Gunder Frank, a major dependency theorist suggests that the following economic activities have contributed to underdevelopment :
(i) Replacing indigenous enterprises with technologically more advanced, global, subsidiary companies.
(ii) Closing the economy to trade with, and investment from, developed countries.
(iii) Workers migrating from villages to foreign dominated urban complexes.
(iv) Forming an unskilled labour force to work in factories and mines and on plantations.
Choose the correct answer from the codes given below :
Codes :
(1) (i), (iii) and (iv)
(2) (i), (ii) and (iii)
(3) (ii), (iii) and (iv)
(4) (i), (ii), (iii) and (iv)
24. In a Harrodian economy, ICOR is 4.5 : 1, population growth is 2% per annum, and the investment rate is 27%. Hence the annual growth of per capita will be :
(1) 2.5 %
(2) 9 %
(3) 6 %
(4) 4 %
25. Which among the following is not correctly matched ?
Author Book
(1) M. Friedman – Capitalism and Freedom
(2) Amartya Sen – Argumentative Indian
(3) Joseph Stiglitz – In Defense of Globalization
(4) Ruchir Sharma – The Rise and Fall of Nations
26. Which among the following statements is not true for the Golden Age equilibrium in the growth model of Mrs. Joan Robinson ?
(1) Rate of profit tends to rising.
(2) Level of real wages rise with output per worker.
(3) Technical progress is neutral.
(4) Population is growing at a steady rate.
27. For the Union Budget of 2015-16, arrange the following in the ascending order of their percentage in GDP :
(i) Revenue deficit
(ii) Effective deficit
(iii) Primary deficit
(iv) Fiscal deficit
Choose the correct answer from the codes given below :
Codes :
(1) (iii), (ii), (i), (iv)
(2) (ii), (iii), (iv), (i)
(3) (i), (iv), (iii), (ii)
(4) (iv), (i), (ii), (iii)
28. While recommending horizontal distribution, which of the following criterion got the least weightage by the 14th Finance Commission ?
(1) Demographic change
(2) Area
(3) Population
(4) Income distance
29. If in a year, the gross fiscal deficit of Government is ` 3,00,000 crores, revenue deficit is Rs. 1,50,000 crores and interest payments are Rs. 80,000 crores, which of the following is the primary deficit of the Government in the year ?
(1) Rs. 70,000 crores
(2) Rs. 23,000 crores
(3) Rs. 2,20,000 crores
(4) Rs. 1,50,000 crores
30. As per proposals of Union Budget of 2016-17, which of the following tax contributes maximum share out of total tax revenue collection ?
(1) Corporation tax
(2) Union Excise Duty
(3) Custom
(4) Income Tax
31. Concepts of concentration and displacement effect in public expenditure are attributed to
(1) Allen T. Peacock and Jack Wiseman
(2) A.R. Prest and I.M.D. Little
(3) A.C. Pigou and J.K. Mehta
(4) Kenneth Arrow and Paul A. Samuelson
32. Which one of the following statements is true for the Verdoon’s law ?
(1) Long run productivity generally grows proportionally to the square root of output growth.
(2) Short run productivity generally grows proportionally to the growth of output.
(3) The value of Verdoon’s coefficient is nearly equal to 1.
(4) Verdoon’s law is quite in consonance with Solow model’s functioning.
33. Which among the following can contribute to improvement in industrial climate of the region ?
(1) Development banks
(2) Trade unions
(3) Natural resources
(4) All of the above
34. Researchers indicate that income velocity of money is falling overtime due to
(1) income elasticity of demand for money is greater than unity.
(2) income elasticity of demand for money is less than unity.
(3) income elasticity of demand for money is equal to unity.
(4) All of the above
35. According to Monetarists, demand for money function is
(1) stable and interest inelastic
(2) constant and interest elastic
(3) stable and interest elastic
(4) unstable and interest inelastic
36. Arrange the following liquid assets in decreasing order
(a) Time deposits
(b) Saving deposits
(c) Currency
(d) Demand deposits
Select the answer from the codes given below :
(1) d, a, b, c
(2) c, d, b, a
(3) a, b, d, c
(4) b, a, c, d
37. Match the following :
38. In his theory of money, James Tobin did not agree with which of the following inferences/assumptions of the demand for money for liquidity preference enunciated by Lord Keynes ?
I. Elasticity of expectations of future interest rates
II. Individuals hold either money or bonds
Of the above which are correct ? Answers from the codes below :
Codes :
(1) Only I
(2) Only II
(3) Both I and II
(4) Neither I nor II
39. A population pyramid of a country shows the :
(1) age structure of male and female population
(2) age structure of male population
(3) age structure of female population
(4) age structure of rural and urban population
40. If the actual unemployment rate is below the natural rate of unemployment, it would be expected that
(1) the rate of inflation would increase.
(2) wages would fall.
(3) the Phillips curve would shift to the right.
(4) the natural rate of unemployment would fall.
41. Demographic transition means :
(1) Shift from the condition of low birth and high death rates to high birth and high death rates.
(2) Shift from the condition of high birth and high death rates to low birth and low death rates.
(3) Shift from the condition of high death and low birth rates to high death and high birth rates.
(4) None of the above.
42. In the context of International Trade dumping refers to
(1) Free distribution of used products by developed countries in developing countries.
(2) Selling a commodity cheaper in foreign market and costly in domestic market.
(3) Sending cheap goods to developing countries by developed countries.
(4) None of the above
43. Match List – I with List – II and select correct answer from the codes given below :
44. A deficit in balance of payments can be corrected by :
(1) a reduction in interest rate
(2) discouraging capital inflows
(3) an increase in interest rate
(4) restricting remittances
45. In the terminology of WTO, which among the following is not an amber box subsidy ?
(1) Minimum support price of cereals
(2) Subsidy on seeds
(3) Subsidy on irrigation rates
(4) Cost of government pest control and management
46. The weight of manufacturing in old IIP (base 1993-94) was 76.36% which has now been changed in the new IIP (base 2004-05) at
(1) 75.53%
(2) Unchanged at 76.36%
(3) 78.22%
(4) 79.39%
47. Which of the following agricultural holdings have largest percentage in India ?
(1) Marginal Holdings
(2) Small Holdings
(3) Large Holdings
(4) Semi-Medium Holdings
48. First two States/Regions in India having highest yield of rice in 2013-14 were
(1) National Capital Territory of Delhi and Punjab
(2) Punjab and West-Bengal
(3) Andhra Pradesh and Haryana
(4) Punjab and Uttar Pradesh
49. Which among the following rates is independently determined in India ?
(1) Repo rate
(2) Reverse repo rate
(3) Both (1) and (2)
(4) Neither (1) nor (2)
50. The main objectives of the 12th Five Year Plan are
(1) inclusive growth and poverty reduction
(2) inclusive and sustainable growth
(3) Faster, sustainable and more inclusive growth
(4) Sustainable and inclusive growth to reduce poverty and unemployment
51. Match List – I and List – II and select the correct answer from the codes given below :
52. As per 2013 information, arrange the following States in the decreasing order of infant mortality rate :
I. Uttar Pradesh
II. Rajasthan
III. Madhya Pradesh
IV. Odisha
Answer from the code below :
(1) III, IV, I, II
(2) IV, III, II, I
(3) I, II, III, IV
(4) III, I, II, IV
53. Which of the following are not considered as flow variables in economic analysis ?
(1) Supply and demand
(2) Saving and investment
(3) Money supply and public debt
(4) Exports and imports
54. If the Reserve Bank of India wishes to decrease the money supply, it should
(1) raise statutory liquidity ratio
(2) buy treasury bills in the open market
(3) raise the discount rate
(4) lower the reserve requirements
55. Which of the following is included in M1 ?
(1) Savings deposits
(2) Demand deposits
(3) Gold stock
(4) Assets under money market mutual funds
56. Arrange the following committees appointed in India in the chronological order :
I. Urjit Patel Committee
II. Goipuria Committee
III. Narsimhan Committee
IV. Chakravarti Committee
Answer from the codes given below :
Codes :
(1) I, II, III, IV
(2) IV, II, III, I
(3) III, I, II, IV
(4) II, IV, I, III
57. For the following policy rates (as on 30.9.2016) of the RBI, arrange them in the descending order of their magnitude and select the answer from the codes given below :
I. Bank rate
II. Repo rate
III. SLR
IV. Reverse Repo rate
Codes :
(1) III, II, IV, I
(2) III, I, IV, II
(3) I, II, III, IV
(4) III, I, II, IV
58. Arrange the following climate events in chronological order :
I. Kyoto Protocol
II. Earth Summit
III. Bali Summit
Answer from the codes below :
Codes :
(1) II, I, III
(2) II, III, I
(3) III, I, II
(4) I, II, III
59. The single window system in the Cooperative Sector coordinates
(A) Supply of rural credit
(B) Supply of agricultural inputs(C)
Extension of marketing facilities
(D) Creation of warehousing facilities
Select the correct answer from the codes given below :
Codes :
(1) A & B
(2) A, B, C & D
(3) A, B & C
(4) C & D
60. Consider the following reasons of continuous decline in average land holding size in India :
(a) Farm mechanisation
(b) Consolidation
(c) Desire of land ownership
(d) Law of inheritance
Select the correct answer from the codes given below :
Codes :
(1) a, b, c
(2) a, b, c & d
(3) b, c & d
(4) c & d
The questions (Q. No. 61 – 65) given below are two statements labelled as Assertion (A) and Reason (R). Select your answer to these questions using the codes given below :
(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.
61. Assertion (A) : An improvement in the income terms of trade is an indicator of increase in capacity to import.
Reason (R) : Income terms of trade can be computed by multiplying net barter terms of trade by the quantity of imports.
62. Assertion (A) : Industrial development strategy in India is faced with the choice of scale, size and intensity of factor use.
Reason (R) : Factor imbalances and resource flows are not favourable to sustainable industrial development in India.
63. Assertion (A) : Agricultural production is characterised by growth and instability in India.
Reason (R) : There are marked inter-regional and inter-crop variations in farm production in India.
64. Assertion (A) : Regional Trade blocks hinder free international trade.
Reason (R) : They discriminate against non-member countries.
65. Assertion (A) : A progressive income tax is based on equimarginal sacrifice.
Reason (R) : Higher the income, lower will be the marginal utility of money for the tax payers.
66. The production function Q = 150 L0.7 K05, exhibits the returns to scale as :
(1) Constant
(2) Increasing
(3) Decreasing
(4) Fluctuating
67. In an open economy Input-Output model, A is the input-coefficients matrix, the viability condition to be satisfied is
(1) |I – A| ≠ 0
(2) |I – A| > 0
(3) |I – A| < 0
(4) All principal minors of the matrix (I – A) must be positive.
68. Match the following :
69. Indirect least squares method of estimation is applied to equations of a simultaneous equation system. The estimates so obtained will be
(1) Unbiased and consistent
(2) Biased and consistent
(3) Biased and inconsistent
(4) Unbiased and inconsistent
70. Given the following total cost and demand functions of a firm, find the price at which profits would be maximised :
C = 5Q2 + 20Q + 10
P = 100 – 3Q
Where C = Total cost
Q = Output
P = Price
(1) 95
(2) 85
(3) 100
(4) 5
71. 
Consider the above diagram of a linear programming problem. If the optimum solution is at point A, then the slack variable(s) corresponding to which constraint(s) is/are non-zero ?
(1) AB only
(2) AB and CD
(3) EF only
(4) CD and EF
72. In a two-variable regression Y is dependent variable and X is independent variable. If the correlation coefficient between Y and X is 0.7, then which one of the following result is correct ?
(1) 7% variations in Y are explained by X.
(2) 70% variations in Y are explained by X.
(3) 49% variation in Y are explained by X.
(4) 0.7% variations in Y are explained by X.
73. Koyck’s approach to econometric analysis deals with relationships involving :
(1) Lagged explanatory variables
(2) Qualitative explanatory variables
(3) Exponential explanatory variables
(4) None of the above
74. For the demand function P = 10 – 2x – 0.5 x2, what is price elasticity of demand at x = 2 ?
(1) Zero
(2) 0.5
(3) 1
(4) 1.5
75. In a regression with 3 independent variables and 20 observations F value calculated is to be tested. What will be degrees of freedom for numerator and denominator in testing procedure ?
(1) 2, 18
(2) 3, 17
(3) 3, 16
(4) 3, 20
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