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 statements are true for the Revealed Preference Theory ?
Choose the correct answer from the code given below :
Statement :
I. Income elasticity of demand should be positive.
II. Consumers Preferences satisfy strong ordering.
Codes :
(A) Both are true.
(B) None are true.
(C) Only I is true.
(D) Only II is true.
2. Demand for foodstuff is income inelastic. This is explained by
(A) Giffen’s Paradox
(B) Engel’s Law
(C) Gossen’s Law
(D) Ricardo’s Law
3. Consider the following factors :
I. Free entry
II. Advertising
III. Goal of satisfactory profits
Which of these are part of Chamberlin’s Monopolistic Competition ?
Codes :
(A) All the three
(B) Only I and II
(C) Only II and III
(D) Only III
4. Non-symmetric risk means :
(A) A risk that can be eliminated by diversifying.
(B) A risk that cannot be eliminated by diversifying.
(C) A risk that can be eliminated without diversifying.
(D) A risk that cannot be eliminated.
5. Who among the following economists developed the concept of ‘Barriers to Entry’ of firms ?
(A) J.S. Bain
(B) W.J. Baumol
(C) Alfred Marshall
(D) W.S. Jevons
6. Even as fixed average cost continues to fall, the average variable cost begins to rise because
(A) returns to factors start diminishing
(B) returns to factors start rising
(C) input prices start rising
(D) producers budget starts shrinking
7. Consider the following statements :
I. The lowest point on the long run average cost curve is known as minimum efficient scale.
II. It is the output at which long run average cost curve stops falling.
Choose the correct option from the code given below :
Codes :
(A) Both I and II are correct.
(B) Both are wrong.
(C) Only I is correct.
(D) Only II is correct.
8. Which among the following is not a characteristic of Imperfect Competition ?
(A) Perfect knowledge
(B) Free transport
(C) Free Entry of firms
(D) Homogeneous product
9. Which among the following conditions are true for Golden Rule of Accumulation of Edmund Phelps for optimum capital accumulation ? Choose from the code below :
I. Savings rate is unique.
II. Marginal productivity of capital be equal to capital depreciation.
Codes :
(A) Both are true.
(B) None of these are true.
(C) Only I is true.
(D) Only II is true.
10. Which among the following were neglected by Keynes in his theory of employment ?
(A) Role of expectations
(B) Role of capital stock
(C) Role of consumption
(D) Role of government
11. Which of the propositions of the past income hypothesis of Duesenberry are correct ?
Choose from the code below :
Statements :
I. The current consumption is a function of not only current income, but also the past income.
II. There is asymmetrical relationship between income and consumption during contraction and expansion.
III. Consumption income relationship is irreversible.
IV. Consumption falls less than income during depression, but the rise in consumption is much more during expansion.
Codes :
(A) I and III
(B) I, II and III
(C) I, II and IV
(D) All the above statements are true.
12. An increase in the quantity of money in the classical macro system will result in :
I. Increase in price level
II. No change in price level
III. Level of output and employment do not change
IV. An increase in employment and output
Select the answer from the codes given below :
Codes :
(A) II and IV
(B) I and II
(C) I and IV
(D) I & III only
13. Given below is the well-known LM Curve and its range is marked in three parts. In which of the marked range Keynes effect does not operate ?
(A) In the range AB
(B) In the range BC
(C) In the range CD
(D) In the range AB and BC
14. The theoretical proposition of stable velocity of money is being weakened by the recent researchers. This has the effect of weakening the position of
(A) Keynesians
(B) Monetarists
(C) New Classicals
(D) Utopians
15. Which of the following is the correct assumption for the Lewis two sector model ?
(A) High unemployment in urban sector
(B) Rising real wages
(C) High marginal productivity in the rural sector
(D) Surplus labour in the rural sector
16. Which of the following is a major indivisibility of Rosenstein-Rodan Model of development ?
(A) Services
(B) Agriculture
(C) Infrastructure
(D) Supply
17. Which among the following statement is true for Marxian model of development ?
(A) Change in Mode of production and Relations in production happen simultaneously.
(B) Change in Mode of production follows change in Relations in production.
(C) Change in Mode of production precedes the change in Relations in production.
(D) Relations in production are not important.
18. Consider the following statements about the Kaldor’s model of economic growth :
I. Investment is a function of profit rate.
II. Capital is homogeneous.
III. Marginal propensity to save is same for wage earners and profit earners.
Of the above statements which are true ? Answer from the code below :
Codes :
(A) All the three statements above are correct.
(B) II and III are correct.
(C) Only I is correct.
(D) I and III are correct.
19. Which one of the following is true for disguised unemployment ?
(A) It has savings potential.
(B) It has investment potential.
(C) It is a source of expanding production.
(D) It is a source of social unrest.
20. In the steady state growth situation in the Solow’s model of growth, the upper limit to growth would be determined by the growth rate of
(A) Population (Labour supply)
(B) Capital
(C) Output
(D) Capital and output
21. Which one of the following pairs is not well matched ?
22. A tax is said to be progressive, when the marginal rate of tax is
(A) greater than the average rate
(B) less than the average rate
(C) equal to the average rate
(D) equal to the marginal sacrifice
23. Assertion (A) : Relatively few private goods are totally rival and excludable.
Reason (R) : Most consumption (and production) has at least some shared aspects.
Codes :
(A) Both (A) and (R) are correct.
(B) Both (A) and (R) are not correct.
(C) (A) is correct, but (R) is not the correct reason of (A).
(D) (A) is correct and (R) is the correct reason for (A).
24. Methods of debt-redemption include
(A) Capital levy
(B) Sinking fund
(C) Debt repudiation
(D) All the above
25. Assertion (A) : For fiscal discipline, expenditure cap is quite desirable.
Reason (R) : A widening fiscal deficit adversely impacts finances of the Central Government.
Codes :
(A) Both (A) and (R) are correct, but (R) is not the correct explanation of (A).
(B) Both (A) and (R) are correct and (R) is the correct explanation of (A).
(C) (A) is true, but (R) is false.
(D) (R) is true, but (A) is false.
26. Assertion (A) : The debt-GDP ratio of the State Governments witnessed a decline after reaching the peak level in 2004.
Reason (R) : ‘Debt swap’ scheme was introduced and interest rates were reduced.
Codes :
(A) Both (A) and (R) are correct and (R) is the correct explanation of (A).
(B) (A) is true, but (R) is not the correct explanation of (A).
(C) (A) is false, but (R) is true.
(D) (R) is true, but (A) is false.
27. Taxes in List – I of the Union Government as per the Constitution of India include :
I. Taxes on consumption and sale of electricity
II. Taxes on sale or purchase of newspapers and on advertisements published therein
III. Taxes on capital value of assets
IV. Duties in respect of succession to property
Codes :
(A) I, II and IV are correct.
(B) I, II and III are correct.
(C) II, III and IV are correct.
(D) II and III are correct.
28. Assertion (A) : There is automatic change in net tax revenue when level of output changes.
Reason (R) : Automatic stabilizers moderate aggregate spending in times of boom and slow down.
Codes :
(A) Both (A) and (R) are correct and (R) is the correct explanation of (A).
(B) Both (A) and (R) are true, but (R) is not the correct explanation of (A).
(C) (A) is true, but (R) is false.
(D) (A) is false, but (R) is true.
29. Match the following :
30. Which of the following is related with optimum currency area ?
(A) Optimal geographical area for a single currency.
(B) Optimal geographical area for several currencies whose exchange rates are relatively pegged.
(C) Single currency or the pegged currencies fluctuate jointly vis-à-vis other currencies.
(D) All the above.
31. Which one of the following is not included under WTO regulations ?
(A) Removal of industrial licenses.
(B) Removal of import tariffs.
(C) Removal of foreign portfolio investments.
(D) Removal of price controls.
32. Which of the following statements is true ?
(A) Asian financial crisis is generally considered to have started on July 2, 1997 with the devaluation of the Thai Baht.
(B) Asian financial crisis is generally considered to have started on 2nd August, 1998 with the Russian’s crisis.
(C) Brazil’s 1999 crisis is generally considered to be the main cause of Asian financial crisis.
(D) All the above are true.
33. Match the following :
34. Which of the following is true for European Union ?
(A) All member countries have the Euro currency.
(B) All member countries have the same defence policy.
(C) There are no tariffs between member countries.
(D) All member countries have the same taxation policy.
35. When a nation imposes an import tariffs, the nation’s offer curve will
(A) shift away from the axis measuring exports
(B) move closer to the axis measuring exports
(C) no shift will take place
(D) None of the above
36. Market at which transaction will be consummated at some specified time in future is called
(A) Spot market
(B) Current market
(C) Capital market
(D) Forward market
37. Capital adequacy ratio of all commercial banks in India is
(A) below the required rate of 9 %
(B) equal to the required rate of 9 %
(C) well above the required rate of 9 %
(D) far below the required rate of 9 %
38. Which of the following are liabilities of commercial banks ?
I. Capital and reserves
II. Cash and balances with RBI
III. Investments
IV. Borrowings
Codes :
(A) I and III
(B) I and IV
(C) I, II and III
(D) II, III and IV
39. Assertion (A) : There was remarkable acceleration in deposit mobilisation of commercial banks after the nationalisation of 14 commercial banks in 1969.
Reason (R) : There was tremendous branch expansion, rise in interest rates and introduction of myriad innovative deposit scheme.
Choose the correct answer from the codes given below :
Codes :
(A) (A) is correct, but (R) is not correct.
(B) Both (A) and (R) are not correct.
(C) Both (A) and (R) are correct, but (R) is not the correct explanation.
(D) Both (A) and (R) are correct and (R) is the correct explanation of (A).
40. Arrange in chronological order, the establishment of the following in India :
I. Industrial Investment Bank of India
II. R.B.I. working group on Development Financial Institutions
III. Small Industrial Development Bank of India
IV. Insurance Regulatory and Development Authority (IRDA)
(A) I, IV, III, II
(B) III, I, IV, II
(C) III, IV, I, II
(D) IV, I, III, II
41. Which of the following are term lending institutions in India ?
I. Industrial Development Bank of India
II. EXIM Bank
III. Small Industrial Development Bank of India
IV. NABARD
Codes :
(A) I & III
(B) I, III and IV
(C) I and II
(D) I, II and III
42. Which of the following are included in broad money (M3) in India ?
1. Currency with the public
2. Demand deposits with Bank
3. Time deposits with Banks
4. ‘Other deposits’ with RBI
Codes :
(A) 1, 2 & 3
(B) 1 & 2
(C) 3 & 4
(D) 1, 2, 3 & 4
43. Assertion (A) : The minimum rate at which the Central Bank is ready to lend is bank rate.
Reason (R) : The bank rate is determined by demand and supply of money.
Codes :
(A) Both (A) and (R) are individually true and (R) is correct explanation of (A).
(B) Both (A) & (R) are individually true, but (R) is not the correct explanation of (A).
(C) (A) is true, but (R) is false.
(D) (A) is false, but (R) is true.
44. Assertion (A) : Delhi has very high density of population.
Reason (R) : People from rural areas are migrating to Delhi.
Choose the correct answer from the code given below :
Codes :
(A) Both (A) and (R) are false.
(B) Both (A) and (R) are correct and (R) is correct reason for (A).
(C) (A) is true, but (R) is false.
(D) Both (A) and (R) are true, but (R) is not an adequate reason for (A).
45. An stable population is characterised by
(A) Constant birth rate
(B) Unchanging age structure
(C) None of the above are true
(D) Both the above are true
46. Which of the following is true for Net Reproduction Rate ?
(A) It relates to average number of daughters born to a female.
(B) It relates to the life span of a female.
(C) Both (A) and (B) are true.
(D) None of (A) or (B) are true.
47. Which option is true for population dividend to manifest ?
(A) Population in the age group between 0-7 years is likely to increase.
(B) Population in the age group between 8-15 years is likely to increase.
(C) Population in the age group between 15-64 years is likely to increase.
(D) Population in the age group above 65 years is likely to increase.
48. Which one of the following is the correct sequence of development of sectors in India post-independence ?
(A) Agriculture, Industry, Service
(B) Service, Agriculture, Industry
(C) Industry, Agriculture, Service
(D) Agriculture, Service, Industry
49. The term HYVP in new agriculture strategy stands for
(A) High Yielding Variety Pesticides
(B) High Yielding Volume Production
(C) High Yielding Varieties Programme
(D) High Yielding Volume Programme
50. If more & more capital and labour are applied to a fixed piece of land, the system of cultivation of farming is known as
(A) Intensive cultivation
(B) Extensive cultivation
(C) Cooperative farming
(D) Double cropping
51. Mention the crop where Green Revolution is the most successful one
(A) Tea & Coffee
(B) Wheat & Rice
(C) Wheat & Pulses
(D) Jowar & Oilseeds
52. Which of the following is not an item of social security of labour ?
(A) Wage
(B) Maternity benefits
(C) Pensions
(D) Industrial Injury Compensation
53. Which of the following is correct about the Contingent Valuation Method (CVM) used in Environmental Economics ?
(A) It is used only for pollutants.
(B) It is used only for items with positive utilities.
(C) It is used for items under market failures.
(D) It is used only for natural resources.
54. Which among the following is not a cause of sickness of industrial units in India ?
(A) Obsolescent technology
(B) Lack of capital account convertibility
(C) Labour problems
(D) Faulty location
55. Assertion (A) : In India, the traditional small scale industries have greater employment potential than the modern small scale industries.
Reason (R) : The value of capital per worker in traditional small scale industries is small than the value of capital per worker in modern small scale industries.
Codes :
(A) Both (A) and (R) are true and (R) is the correct explanation of (A).
(B) Both (A) and (R) are true, but (R) is not the correct explanation of (A).
(C) (A) is true, but (R) is false.
(D) (A) is false, but (R) is true.
56. For the year 2012-13 procurement of wheat has been largest in which of the following States ?
(A) Punjab and U.P.
(B) U.P. and M.P.
(C) U.P. and Haryana
(D) Punjab and Haryana
57. For the year 2013-14 arrange in descending order, the contribution of following taxes as percentage of G.D.P. :
1. Income Tax
2. Service Tax
3. Corporation Tax
4. Excise Duty
Codes :
(A) 4, 2, 3, 1
(B) 3, 1, 4, 2
(C) 2, 3, 1, 4
(D) 1, 2, 3, 4
58. Which of the following facts are correct about the Competition Commission of India ?
I. It was established in 2003.
II. It was established on the recommendations of Raghavan Committee.
Codes :
(A) Both I and II are true.
(B) Both I and II are not true.
(C) Only I is true.
(D) Only II is true.
59. The base year for newly developed All India Consumer Price Index Number – Rural C.P.I and Urban C.P.I. is
(A) 2004 – 05
(B) 2006 – 07
(C) 2009 – 10
(D) 2010
60. On the basis of 10 parameters for the ‘ease of doing business’, World Bank’s latest report, during the period July 2013 to May 2014, India has come to which of the following position ?
(A) 138
(B) 142
(C) 144
(D) 146
61. Which is false in following ?
(A) The duration of Tenth Five Year Plan was 2002-2007.
(B) Ryotwari tenure has been the intermediary in Indian land system.
(C) Zamindari system was introduced by Lord Dalhousie.
(D) Mahalwari land tenure system was introduced in Agra and Oudh.
62. The Financial Sector Legislative Reforms Commission 2013 submitted its recommendations on the following aspects :
I. Legislative
II. Non-legislative
III. Marketing
IV. Advertising
Codes :
(A) I, II, IV
(B) I, II, III
(C) II, III, IV
(D) I, II
63. Which of the following States had the lowest women employment percentage under MNREGA programme during 2013-14 ?
(A) U.P. and Rajasthan
(B) Odisha and M.P.
(C) U.P. and Odisha
(D) Rajasthan and West Bengal
64. In a growth model given below :
Growth requires the condition :
65. Given total cost function C = 5Q2 + 20Q + 5, at price = Rs 5 marginal cost is
(A) 100
(B) 200
(C) 85
(D) 70
66. For testing the significance of overall regression the test to be used is
(A) t Test
(B) F Test
(C) χ2 Test
(D) d Test
67. Including relevant lagged values of the dependent variable on the right hand side of a regression equation could lead to which one of the following ?
(A) Biased but consistent coefficients’ estimates
(B) Biased and inconsistent coefficients’ estimates
(C) Unbiased and inconsistent coefficients’ estimates
(D) Unbiased and consistent coefficients’ estimates
68. In the production function Q = ALaKb match the following :
69. Match the following :
70. If OLS is used in the presence of auto-correlation, which of the following will be likely consequences ?
i. Coefficients estimates may be misleading.
ii. Hypothesis tests could reach the wrong conclusions.
iii. Forecasts made from the model could be biased.
iv. Standard errors may be inappropriate.
(A) ii and iv only
(B) i and iii only
(C) i, ii and iii only
(D) i, ii, iii and iv
71. In the context of simultaneous equations econometric models, consider the following statements :
i. Identification is a problem to be dealt with before estimation.
ii. Order condition is necessary but not a sufficient condition of identification.
iii. Two-stage least squares method of estimation gives consistent estimators if the equation is under-identified.
iv. Under indirect least squares method, least squares method is applied to reduced form equations.
Which of the following is correct ?
(A) i and ii
(B) i, ii, iii and iv
(C) i, ii and iii
(D) i, ii and iv
72. Simplex method is used for solving the problems of
(A) Linear Programming
(B) Input Output Analysis
(C) Regression
(D) Correlation
73. Which statement is false in following ?
(A) t-distribution was given by W. Gosset.
(B) Tippet’s Tables are used for random sampling.
(C) Binomial distribution is symmetrical if p = q.
(D) The regression coefficient of y on x is equal to 
74. Given that LM function is Y = 100 + 10i and the IS function is Y = 160 – 20i, find the correct value of equilibrium level of income and rate of interest from the given options.
(A) 120 and 2
(B) 90 and 3
(C) 150 and 2
(D) 120 and 3
75. In a two industry case, for the Simon Hawkins viability condition which statement is correct (aij; i = 1, 2 and j = 1, 2) ?
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