Economics

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ENTRANCE EXAMINATION, 2010 M.A. ECONOMICS 1. In a closed economy, the balanced budget multiplier is (a) (b) (c) (d) Equal to 1 Less than 1 More than 1 Dependent on the marginal propensity to consume in the economy.
2.
Stagflation describes a situation of (a) (b) (c) (d) Rising prices and rising output Rising prices and falling or stagnant output Falling or stagnant prices and rising output Falling or stagnant prices and falling or stagnant output.
3.
If Canada has a comparative advantage in the production of wheat compared to the United States, it means that (a) (b) (c) The opportunity cost of producing wheat is higher in Canada than in the US The opportunity cost of producing wheat is lower in Canada than in the US With free trade, Canada will export all of its wheat
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(d)
With free trade, the US will not produce any wheat.
4.
Infant industry protection is (a) (b) (c) (d) The policy of ensuring that children are not adversely affected by industrial pollution The policy of protecting a new domestic industry from lower cost imports The policy of providing bank credit to industries run by weaker off sections The policy of subsidizing imports in newly industrializing countries.
5.
For the countries in the European Union that share a common currency, the euro, (a) (b) (c) (d) It is impossible to have different real exchange rates from one another It is possible to have real exchange rates that are different from one another The nominal and real exchange rates will always very according to fiscal policy The nominal and real exchange rates will always vary according to capital flows.
6.
The current account balance in an open economy (a) (b) (c) Always includes the balance on investment income Never includes the balance on investment income Includes the balance on investment income and flows of investment
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(d)
Includes flows of investment but not the balance on investment income.
7.
A streetlight is considered as a good example of a public good (a) (b) (c) (d) Because it is provided in public spaces Because its consumption is non-rival and non-excludable Because its consumption is rival but non-excludable Because its consumption is non-rival but excludable.
8.
The bottom 20 percent of the worlds population are estimated to receive around this much of global income (a) (b) (c) (d) Less than 1 percent Around 5 percent Around 10 percent Around 15 percent.
9.
If an economy is a price taker in world markets for both exports and imports, exchange rate devaluation (a) (b) (c) Will have no effect on the balance of trade Will cause the balance of trade to improve Will cause the balance of trade to deteriorate
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(d)
Will turn a trade deficit into a balance.
10.
The Gold Standard refers to an international currency regime under which (a) (b) (c) (d) Only gold was used in international transactions Only gold was used as money in domestic transactions Countries officially linked their money supply to a specific value of gold Countries officially linked the value of their money to a specific weight of gold.
The next six questions 11-16 are based on the following table which gives the variable cost of producing the different levels of output of a commodity that a competitive firm might produce: Variable Cost of Production 0 25 42 54 64 75 93 112 140 180 230
Output 0 1 2 3 4 5 6 7 8 9 10
The sunk cost of production in the short run is 15. 11. If the price of the commodity is 20, then the profit-maximizing level of output is
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(a) (b) (c) (d)
6 7 8 9
12.
If the price of the commodity is 19, then the profit-maximizing level of output is (a) (b) (c) (d) 6 7 8 9
13.
Let (20) denote the profit of the firm when the price of the output is 20 and let (19) denote the profit of the firm when the price of the output is 19. Which of the following is correct? (a) (b) (c) (d) (20) = (20) < (20) > (20) = (19) = 6 (19) (19) (19) = 23
14.
If the price of the commodity is 14, then the profit-maximizing level of output is
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(a) (b) (c) (d)
4 5 0 None of above.
15.
If the price of the commodity is 17, then the profit maximizing level of output is (a) (b) (c) (d) 1 2 3 5
16.
If the price of the commodity is 17, then at the profit maximizing level of output the firm (a) (b) (c) (d) Incurs a loss of 5 Incurs a loss of 15 Makes a profit of 7 None of the above.
17.
If good x and good y are perfect substitutes, then the indifference curves will be (a) Strictly convex to the origin
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(b) (c) (d)
Strictly concave to the origin Straight lines L-shaped.
18.
A monopolist faces the following demand function D(P): D(P) = = = 10 for P in the interval [Q 10] 20 P for P in the interval (10, 20) 0 for P in the interval [20, .)
Now suppose that the monopolist has zero-variable cost of production. However, if it produces any positive amount, it must incur a fixed cost of Rs.50. What is the optimal monopoly price? (a) (b) (c) (d) 15 10 5 There is no monopoly equilibrium.
The next two questions 19 and 20 are based on the following: 19 The consumers budget set is (a) (b) {(x1, x2) |4x1 + 3x2 10 and x1, x2 0} {(0, 0), (0, 1), (0, 3), (1, 0), (1, 1), (1, 2), (2, 0)}
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(c) (d)
0, 1), (0, 3), (1, 0), (1, 1), (1, 2), (2, 0)} {(1, 2)}
20.
Suppose the price of both commodities fall by 10 paisa and money income increases by 10 paisa. If the preference of the consumer over the two gods have not changed, then (a) (b) (c) (d) At the optimum, the consumer would consume more of both commodities. At the optimum, the consumer would consume more of commodity 1 and less of commodity 2 At the optimum, the consumer would consume less of commodity 1 and more of commodity 2 The consumers optimal bundle does not change.
21.
Satish is very conscious about the food he eats. He only eats rotis and dal; a cup of dal costs Rs. 2 while each roti costs Re 1 and Satish decides to spend only Rs 13 per day on food. Also he decides to consume exactly 5500 calories a day; he has been told that each roti has 1000 calories while each cup of dal has 500 calories. He spends his entire money allocated on foods. Then (a) (b) (c) (d) He consumes 3 rotis and 5 cups of dal per day He consumes no more than 3 rotis per day He consumes no more than 5 cups of dal per day He consumes 5 rotis and 4 cups of dal per day.
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22.
A monopolist has a demand curve with constant price elasticity with absolute value 4. The monopolist charges a price of 60 per unit of output. What is its marginal cost at this level of output? (a) (b) (c) (d) 2.35 1.36 45 54
23.
In a two good world, a consumer..given by the following: U(x1, y) = max (x1, y)1 where x and y of the first and second good respectively. The price of both goods are Rs.. The consumers income is Rs.100. His optimal consumption bundle is Rs.100. His optimal consumption bundle is (a) (b) (c) (d) Either (i) zero unit of x and 50 units of y or (ii) ..to unit of y. 50 units of x and 50 units of y. 25 units of x and 25 units of y. None of the above.
24.
A firm has a production function q=A-K0-5Ll-8, where A is a positive constant. Such a production function exhibits (a) (b) Decreasing return to scale and diminishing marginal product for factor K Increasing return to scale and diminishing marginal product for factor K
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(c) (d)
Decreasing return to scale and increasing marginal product for factor K Constant returns to scale with increasing marginal product for factor L
25.
The short run supply curve for a competitive firm is given by (a) (b) (c) (d) The marginal cost curve of the firm The marginal cost curve above the average cost curve The marginal cost curve above the average variable cost curve The upward sloping part of the marginal cost curve
26.
If X1,X2,.,Xn are non=negative real numbers, then their (a) (b) (c) (d) Arithmetic Mean < Geometric mean Geometric Mean < Arithmetic mean Arithmetic Mean= 0.5 (Geometric Mean)
There is no fixed relationship between Arithmetic Mean and Geometric Mean
27.
If (x/b) > (b/c), then (a) (b) xc > b2 xc < b2
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(c) (d)
xc = b2 Cannot say anything about relation between x, b and c
28.
Let f(x)=(log(x))/ x, where 0<x<1. Then for all x such that 0<x<1 (a) (b) (c) (d) f(x)<0 f(x)>0 f(x)>0, if 0<x<0.75 and f(x) <0, if 0.75 < x <1 f(x)>0, if 0<x<0.5 and f(x) <0, if 0.5 < x <1
29.
Given two numbers x = (37+47)2 and y = 343, which of the following must be true? (a) (b) (c) (d) x>y y>x x=y x = y/2
30.
Beenas average score after 8 class tests is 84. In her first 7 class tests. Beenas average score was 85. In her last class test, Beena has scored. (a) 82
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(b) (c) (d)
87 77 None of the above.
31.
The function (x) = log10 x is continuous over the interval. (a) (b) (c) (d) 9-a, a), where a > 0 (-, + ) [-a, a], where a > 0 [0, 1]
32.
If a-b =M, M is different from 0 and (a + b) = 4, then (a) (b) (c) (d) There are always real values for a, b Whenever 4 M > 0 there are real values for a, b Whenever O > M there are positive, values for both a, b Whenever O > M there are negative values for both a, b.
33.
Let X1, X2, , X20 and Y1, Y2, , Yn be two collections of sets. Suppose every X1 contains 5 elements and every Yj contains 2 elements and If each elements of S belongs to exactly 10 of the X 1s and to exactly 4 of Yjs, then n is
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(a) (b) (c) (d)
10 20 100 50
34.
Suppose interest is compounded half-yearly at the rate of 10% per annum. If the present value of an asset which returns a fixed sum of Rs. X after one year and nothing thereafter is Rs. 50,000, then X is equal to (a) (b) (c) (d) Rs. 54,875 Rs. 55,000 Rs. 55,125 Rs. 55,250
35.
If the elasticity of (x) with respect to x is 0.5 ((x) > 0 and x > 0), then the elasticity of (x) / x with respect to x is (a) (b) (c) (d) -0.5 0 0.5 1
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36.
In an examination, there are three multiple choice questions and each question has 4 choices. Number of ways in which a student can fail to get all answers correct is (a) (b) (c) (d) 12 27 63 72
37.
A function is selected at random from all the functions of the set A = (1, 2, 3, , n) in to itself. The probability that the function selected is one-to-one is (a) (b) (c) (d) 1/nn 2/(n-1)l 1/nl (n-y)/nn-1
38.
A fair die has given the number 6 on five consecutive throws. What is the probability that the next throw will also give the number 6? (a) (b) 1/30 1/6
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(c) (d)
5/6 None of the above.
39.
The number 0.999999 is (a) (b) (c) (d) Exactly equal to 1 Slightly less than 1 Slightly more than 1 Between 0-99 and 0.999
40.
Let S = 1 + + 1/3 + + Then (a) (b) (c) (d) S is equal to 4 S is equal to 6 S is equal to 8.5 The sum S does not converge to any finite value
41.
Which of the following is a function? (a) A rule that assigns the circumference of a rectangle to its area.
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(b) (c) (d)
A rule that assigns to each number its square root. A rule that assigns to each person in a classroom his or her height. A rule that assigns the salary of a person to his or her years of education.
42.
Let Gi denote the Gini coefficient for the income distribution i. Which of the following is true? (a) (b) (c) (d) G5 < G1 = G2 = G3 = G6 =G4 G5 < G1 = G2 = G3 = G6 <G4 G1 < G2 = G3 = G4 > G5 >G6 G1 < G2 = G3 = G4 < G5 <G6
43.
Let oi denote the standard deviation for the income distribution i. Which of the following is true? (a) (b) (c) (d) O5 < o1 = o2 = o6 < o4 < o3 O5 < o1 = o2 = o6 < o3 < o4 O5 < o1 = o2 < o6 < o4 < o3 O5 < o1 = o6 < o2 < o4 < o3
44.
Let ui denote the median for the income distribution i. Which of the following is true?
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(a) (b) (c) (d)
u4 < u1 = u2 = u5 < u6 < u3 u4 < u1 = u2 = u5 = u6 < u3 The mean is equal to the median for each of the given distributions. The mean is different from the median for each of the given distributions.
45.
Consider the five income distributions D1, D2, D3, D4, D5. Which of the following is true? (a) (b) (c) (d) There is no Pareto-optimal distribution. All distributions are Pareto-optimal. D3 is the only Pareto-optimal distribution. D1 and D3 are the only Pareto-optimal distributions.
46.
In case the painter works on Thursday, which among the following alternatives is possible? (a) (b) (c) (d) The electrician works on Tuesday. The electrician works on Friday. The interior decorator does his work after the painter. The plumber and the painter work on consecutive days.
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47.
In case the painter works on Friday, which among the following statements must be untrue? (a) (b) (c) The carpenter may work on Wednesday. The carpenter and the electrician may work on consecutive days. In case the carpenter works on Thursday, the electrician has to work on the previous day, i.e., Wednesday. The plumber may work before the electrician does.
(d)
48.
Which arrangement among the following is possible? (a) (b) (c) (d) The painter will work on Wednesday and the plumber on Thursday. The carpenter will work on Tuesday and the painter on Friday. The painter will work on Monday and the carpenter on Thursday. The carpenter will work on Wednesday and the plumber on Thursday.
49.
There are two egg delivery boys you can order eggs from. The probability of the first boy falling and breaking all the eggs is and the probability of the second boy falling and breaking all the eggs in 1/5. How would you distribute your order for eggs so as to minimize expected total loss of eggs? (a) (b) Order all your eggs from the first boy. Order all your eggs from the second boy.
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(c) (d)
Distribute the order for eggs between the two boys equally. Order three-fourths of your eggs from the first boy and the rest from the second boy.
50.
If you integrate the function (x) = 1/x from 1 to 3, you get (a) (b) (c) (d) 2 Log 3 Log 4 None of the above.
51.
If x < y + > 0, then (a) (b) (c) (d) x>y xy x>0>y x<0<y
52.
The rate of interest is (a) A flow variable.
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(b) (c) (d)
A stock variable. The ratio of a flow variable to a stock variable. The ratio of a stock variable to a flow variable.
53.
The fiscal deficit is (a) (b) (c) (d) A flow variable A stock variable. The ratio of a flow variable to a stock variable. The ratio of a stock variable to a flow variable.
54.
If in a given year a countrys GDP at constant prices is 1000 currency units and the value of its implicit GDP deflator for that year is 110, the value of the countrys GDP at current prices (in its currency units) is (a) (b) (c) (d) 890 909.09 990.09 1100
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55.
Suppose the difference between the transactions velocity and the income velocity of circulation of money in an economy is 5 and the money value of total transactions is 6 times the money value of aggregate income. If the quantity of money in circulation is 1000 currency units, then the money value of aggregate income in currency units is (a) (b) (c) (d) 1000 1200 1500 1800
56.
Suppose an asset provides returns of Rs. 315 after one year, Rs. 661.50 after two years and Rs. 1389.15 after three years and nothing thereafter. If interest is compounded yearly and the rate of interest is 5% per annum, what is the present discounted value of the asset? (a) (b) (c) (d) Rs. 2,050 Rs. 2,100 Rs. 2,200 Rs. 2,250.
57.
Suppose a plant can be used to produce in a day x units of product 1 and y units of product 2 where y = (32 5x) / (10 x), where 32/5 x 0. If the unit price of product 1 is twice the unit price of product 2, then to maximize total revenue the number of units of x the plant should be used to produce in a day is
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(a) (b) (c) (d)
4 5 6 6.4
58.
What is the value of the investment multiplier in the economy? (a) (b) (c) (d) Between 1.9 and 2.1 Between 2.1 and 2.3 Between 2.3 and 2.5 More than 2.5
59.
What is the equilibrium value of Y in the economy? (a) (b) (c) (d) Between 3250 and 3750 Between 3750 and 4250 Between 4350 and 4750 Between 4750 and 5250.
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60.
If instead of 750 units of money the government makes annual transfer payments equal to 10% of Y, then the value of the investment multiplier will (a) (b) (c) (d) Decrease by less than unity Decrease by more than unity Increase by less than unity Increase by more than unity.
61.
If instead of 750 units of money the government makes annual transfer payments equal to 10% of Y, then the equilibrium value of Y wil (a) (b) (c) (d) Decrease by less than 1000 Decrease by more than 1000 Increase by less than 1000 Increase by more than 1000
62.
Which of the following is a possible sequence of combinations for the student in the two successive weeks? (a) Week 1 : Philosophy, Biology, Economics; Week 2 : Biology, Mathematics, Literature. Week 1 : Philosophy, Biology, Mathematics; Week 2 : Philosophy, Biology, Literature
(b)
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(c)
Week 1 : Philosophy, Mathematics, Literature; Week 2 : Philosophy, Biology, Economics. Week 1 : Biology, Mathematics, Literature; Week 2 : Philosophy, Economics, Mathematics.
(d)
63.
If the student studies Philosophy, Biology and Economics in the first week, which of the following combinations must be studied in the third week? (a) (b) (c) (d) Philosophy, Biology and Economics. Philosophy, Biology and Mathematics. Philosophy, Economics and Mathematics. Economics, Mathematics and Literature.
64.
If the student studies Philosophy, Literature and Mathematics in the first week, which of the following combinations must be studied in the eleventh week? (a) (b) (c) (d) Philosophy, Literature and Mathematics. Philosophy, Biology and Mathematics. Philosophy, Economics and Mathematics. Economics, Mathematics and Literature.
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65.
If x, y and z are consecutive negative integers, and if x > y > z, which of the following must be a positive odd integer? (a) (b) (c) (d) Xyz (x y) (y z) X yz X(y+ z)
66.
Suppose one wishes to prove that if all X are Y, then all Z are W. To do this, it would suffice to show that (a) (b) (c) (d) All Z are X, and all W are Y All Y are Z, and all W are X All X are Z, and all Y are W All Z are X, and all Y are W.
67.
Let X and Y be statements. If we want to disprove the claim that X implies Y, we need to show that (a) (b) (c) X is false Y is false X is true, but Y is false
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(d)
Y is true, but X is false.
68.
Let X, Y and Z be statements. Suppose we know that X implies Y, and that Z implies X. We also know that Y is false. We can infer that (a) (b) (c) (d) X is false, and Z is true X is true, and Z is false Both X and Z are true Both X and Z are false.
69.
Let X and Y be statements. Which of the following strategies is not a valid way to show that X implies Y? (a) (b) (c) (d) Show that some statements Z implies Y, and then show that X implies Z Show that either X is false, or Y is true, or both Assume that X is false, and Y is true, and deduce a contradiction Assume that X is true, and Y is false, and deduce a contradiction
70.
Let P(n, m) be a property about two integers n and m. If we want to prove that f or every integer n, there exists an integer m such that P(n, m) is true, then we should do the following. (a) Le n and m be arbitrary integers. Then show that P(n, m) is true.
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(b) (c)
Find an integer m such that P(n, m) is true for every integer n. Let n be an arbitrary integer. Then find an integer m possibly depending on n such that P(n, m) is true. Find an integer n and an integer m such that P(n, m) is true.
(d)
71.
Let X and Y b statements. If we know that X implies Y, then we can also conclude that (a) (b) (c) (d) X is true, and Y is also true If X is false, then Y is false If Y is true, then X is true. If Y is false, then X is false.
72.
Let X, Y and Z be statements. Suppose we know that X implies Y, and that Y implies Z. If we also know that X is false, we can infer that (a) (b) (c) (d) Y is true, and Z is false Y is false, and Z is true Both Y and Z are false None of the above.
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73.
The United States is a major exporter of (a) (b) (c) (d) Diamond Bauxite Coffee Corn.
74.
The terms of trade are (a) (b) (c) (d) The countries production possibilities curve The autarky equilibrium The exchange rate of the two goods being traded The value of exports.
75.
Autarky means that (a) (b) (c) A countrys consumption possibilities are given by its production possibilities Equilibrium attained with the maximum gains from specialization and trade. Equilibrium has been reached with the maximum amount of international trade. The nation has such a high standard of living that there are no poor people.
(d)
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76.
Linear accelerator has the following characteristic (a) (b) (c) (d) Depends on expectations and has the dimension of time. Depends on expectations and has the dimension of inverse time. Does not depend on expectations and has the dimension of time. Does not depend on expectations and has no time dimension.
77.
If the saving propensity is 14% and the incremental capital output ratio is 4, and the population rate of growth is 3%, there are constant returns to scale and no technical progress. (a) (b) (c) (d) Warranted rate of growth is greater than the natural rate of growth. Warranted rate of growth is less than the natural rate of growth. The economy will always grow at 3% rate of growth. The economy will always grow at more than 3% rate of growth.
78.
There are four bus routes between A and B and three us routes between B and C. A man can travel round trip in number of ways by bus from A to C via B. If he does not want to use a bus route more than once, in how many ways can he make round trip? (a) (b) 72 144
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(c) (d)
14 19
79.
The Economics Nobel Prize for the year 2009 was awarded to (a) (b) (c) (d) Elinor Ostrom and Oliver Williamson. Paul Krugman. John Nash. Robert Aumann and Thomas Schelling.
80.
Consider the set A = {x|0<x<1}. What is the minimum number that belongs to set A? (a) (b) (c) (d) 0 0.001 0.00002 There is no minimum number in set A.
81.
In the list of five countries given below, choose the one which has a positive trade surplus. (a) USA
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(b) (c) (d)
Great Britain Greece China.
82.
Which one of the statements given below is correct for the year 2000-01? (a) (b) (c) The primary sector of the Indian economy is 50% of the GDP. The tertiary sector of the Indian economy is 50% of the GDP. The GDP contribution of the primary sector of the Indian economy is larger than that of the secondary sector. The GDP contribution of the secondary sector of the Indian economy is larger than that of the tertiary sector.
(d)
83.
If utensils worth Rs. 100 are produced with steel worth Rs. 50, wages paid are Rs. 10, depreciation of machinery is 0 and other material purchased is Rs. 10, then value added in the process is (a) (b) (c) (d) 40 50 100 10
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84.
If an economy produces GDP of Rs. 30 billion per year with a capital stock of Rs. 135 billion, then capital output ratio is a (a) (b) (c) (d) Stock variable with a value of Rs. 4.5 billion. Stock variable with a value 4.5 years. Flow variable with a value of Rs. 4.5 billion. Flow variable with a value of 4.5 as pure number.
85.
As economy has a proportionate income tax at the rate t marginal propensity to consume of a and marginal propensity to import of m, with values a= 0.3, t = 0.2, m = 0.1. The short run investment multiplier of the economy will be (a) (b) (c) (d) 1/[1 a(1 t) + m] = 50/23 1/[1 (a m) (1 t) = 25/11 1/[1 a(1 t) - m] = 50/3 1/[1 a + t + m] = 2
86.
The Sub-prime Lending crisis was originated in (a) (b) (c) India USA UK
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(d)
China.
87.
In the following statements, investment is meant to be investment from a macroeconomic point of view. The following transaction (i), (ii) and (iii) have taken place in the economy: (i) Your family has taken out a mortgage from a bank and purchased a new house with the loan advanced to your family by the bank. You have used your salary to buy share of the Steel Authority of India Ltd. You draw money from your savings bank account of State Bank of India (SBI) and invest in SBI mutual fund share.
(ii) (iii)
Indicate which combination of statements is correct. (a) Transaction in (i) represented an act net zero investment, transaction in (ii) represented an act of net saving, transaction in (iii) represented an act of net positive investment Transaction in (i) represented an act of net positive zero investment, transaction in (ii) represented an act of net positive saving, transaction in (iii) represented an act of net positive saving Transaction in (i) represented an act net positive investment, transaction in (ii) represented an act of net saving, transaction in (iii) represented an act of net positive saving Transaction in (i) represented an act net positive investment, transaction in (ii) represented an act of net positive saving, transaction in (iii) represented an act of net zero saving
(b)
(c)
(d)
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88.
The sum of the first n odd integers is (a) (b) (c) (d) n2 n3 n 4n
89.
Which of the following will be inverse function of f(x)=x2? (a) (b) (c) (d) g(y)=1/y g(y)=y2 g(y)= y There is no inverse function
90.
The share of the primary sector in the Indian Labour Force in 2000 was approximately around (a) (b) (c) (d) 50 percent 60 percent 70 percent 80 percent
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91.
The country with the largest external debt in the world today is (a) (b) (c) (d) Brazil Argentina China United State
92.
The beginning of modern industry in India occurred in (a) (b) (c) (d) the late 18th century the beginning of the 19th century the middle of the 19th century the turn of the 20th century
93.
Market capitalization in the Bombay Stock Exchange (BSE) rose by 100 percent in a single year. This means that (a) (b) (c) (d) the sensex rose by 100 percent during that year the value of share traded at the BSE over the year increased by 100 percent when compared with the precious year the value of all outstanding shares of companies listed at the BSE rose by 100 percent the price of every share listed at the BSE rose by 100 percents
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94.
Two event are said to be independent if (a) (b) (c) (d) Prob(A and B)=Prob(A). Prob(B) Prob(A and B)=Prob(A)+ Prob(B) Prob(A /B)=Prob(A)-Prob(B) Prob(A/B)=Prob(A)-Prob(B)+ Prob(A and B)
95.
Which of the following is not a tool of monetary policy? (a) (b) (c) (d) The tax rate The interest rate The cash-reserve ratio Open market operations of the central bank
Read the following passage and answer the questions 96-100: In the beginning, money was a commodity like any other, save that its physical characteristics allowed of its being divided into parts of varying but specific weight, and it had high enough worth in small enough bulk so that it could be readily carried around. Thus it served as an intermediate step in exchange, eliminating the inherent awkwardness of barter. And it was a convenient way of holding wealth- a storehouse of value. But in major measure the separate of money, its personality, was discovered with the establishment of banks; through banks the supply of money could be increased or, on occasion, sharply diminished, and this, more or less at will. The funds thus made available could be used for investment, necessary or frivolous consumption or the needs of the state.
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Together, the deposits and the banknotes were in excess of the value of the metal on which they were based. This, however, was entirely safe and acceptable for so long as everyoneoriginal depositors, borrowers, note holders-did not come at the same time for the hard money. Unless there were fear, panic or spreading rumor and unease about the competence and solidity of the bank- all by one means negligible possibilities- this would not happen. Given the profit possible from this manufacture of money- the return in interest for an effortless act of lending- the temptation to overdo a quite wonderful thing was obvious. Out of temptation were born the central banks and much of the structure of modern bank regulation. In return for various privileges, including in letter times the exclusive right to issue notes, central banks came into existence. They then proceeded to regulate the lending and money creation of the lesser banks, which they did in an inconveniently disciplinary way by returning to the smaller banks their notes for payments in metal and by enforcing minimum levels of reserves against deposits.
96.
Galbraith argues that (a) (b) (c) (d) Money was a commodity like any other central banks were created Money was at first a commodity that could be easily divided by weight and carried around easily The physical feature of money being something that can be carried around easily gives it a special personality Money can never be more than an intermediate feature in exchange
97.
The presence of banks means that (a) (b) (c) Money in circulation can be in excess of the supply of metal that is money Deposits in banks must always be equal to the notes issued by banks Money is always safe in banks and this is acceptable to all
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(d)
Banks are the basic storehouse of value
98.
Central banks exist because (a) (b) (c) (d) Banks earn profits- in the form of a return 9in interest-from an effortless act of lending The funds loaned out can be used for investment, necessary or frivolous consumption or the needs of the State All banks want the exclusive power to issue notes It is necessary to regulate the lending and money creation of lesser banks, given the temptation to overdo lending
99.
Minimum levels of reserves against deposits (a) (b) (c) (d) Is a rule that money creation necessarily imposes on all banks Are necessary because depositors, borrowers and note holders all come to banks at the same time for their money Are part of the regulatory actions of central banks Are return for various privileges that are accorded to banks
100.
The supply of money on an economy can be increased or decreased at will (a) (b) Because of the inherent awkwardness of barter Through the activities of banks
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(c) (d)
Because money is a storehouse of value Since deposits and banknotes cannot be in excess of the metal on which they are based
ENTRANCE EXAMINATION, 2010 M.A. ECONOMICS (With Specialization in the World Economy) 1. (a) State with adequate reasoning if the following statements are True or False: (i) Consider a utility function U(x)1, + x2) = u(x1) + x2. The income effect on the first commodity (whose quantity is measured by the variable x1) is zero. 5 Calculate the Lerners index when the demand function is given by q=kp-t, k > 0, where q and p represent quantity and price respectively. (None that Learners index is a measure of price margin) 10
(ii)
2.
Consider an economy characterized by the following relationships: C = 500 + 0.4 + Yd I = 100 + 0.1 + Y 5000 + i G = 200 and T = 200 .
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Where C is consumption, I is investment, G is government spending. T are taxes Y is real income. Ya is the interest rate, (M/P)D is the real money demand and (M/P)5 is the real money supply. (a) (b) Calculate the equilibrium real income and the interest rate in this economy. 10 Now assume that the Central Bank increase the real money supply to 2000. What is the charge in the real income and the interest rate under this policy? Provide the economic rationale.
3.
(a)
What is factory intensity reversal? Critically evaluate (with diagrams) the validity of the Heckscher-Ohlin theory of trade in the presence of such reversal. 10 What are the invisibles in the balance of payments? Examine the mechanism and the implication of the fixed and the flexible exchange rate systems to achieve the equilibrium in the balance of payments. 10 (i) Consider the set Ac R2 (that is, A is a subset of R2) as defined by the following. A = {(x, y) R2+ : 1 < x < 7, y = x} Draw the set A in the xy plane. Is this set open? Is it bounded? 5 (ii) Let : R - R be defined by (x) = x2, x 1 3/2, x > 1 Find the limit, lim (x). Is this function continuous at x =1? Is it continuous on [0, 1]? Is it continuous on [1, 2]? 5
(b)
4.
(a)
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(b)
(i) (ii)
A random variable X has a uniform distribution distribution) in the range (-5, 10). Obtain Pr(|X|>4].
(rectangular 5
For a discrete random variable X, it is given that Pr (X = O) = Pr (X = 2) = p, and Pr (X = 1) = 1 2p, where 0 p, . Find the value of p that maximizes the variance of X. 5
5.
Answer any one of the following questions (in not more than 500 words): 20 (a) International cooperation/coordination of policy responses is needed to deal with the problem of global warming and climate change. Discuss giving economic arguments. It the Governments response to the concerns about recent trends in food price inflation in India adequate? What additional fiscal, monetary and trade policies could be proposed to deal with it?
(b)
ENTRANCE EXAMINATION, 2010 M.A. ECONOMICS PART A A.1 The essence of Engels law is that as household incomes rise (a) (b) (c) (d) (e) The savings rate increases. The proportion of income spent on food declines. The expenditure on food declines. The proportion of income spent on luxuries declines. None of the above.
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A.2
I had Rs.25 with me when I went to the market and I spent Rs.7 in all. What percentage of the total did I have at the end of my market visit? (a) (b) (c) (d) (e) 72 per cent. 71.5 per cent. 28 per cent. 63.5 per cent. None of the above.
A.3
A competitive firm has constant marginal cost of 12 per unit of output. To maximize profit, it sells. (a) (b) (c) (d) (e) 12 units of output. Any amount of output Any amount of output provided the price per unit is Rs.12 or more. Any amount of output provided the average cost is increasing. None of the above.
A.4
The dependency ratio is the ratio of (a) (b) Children to adults in the population. Unemployed to employed workers in the labour force.
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(c) (d) (e)
Foreign aid to total GNP. Non-working are-group population to working age-group population. None of the above.
A.5
The capital-output ratio in an economy is the ratio of (a) (b) (c) (d) (e) A flow variable to a stock variable. Two flow variables. Two stock variables. A stock variable to a flow variable. None of the above.
A.6
The Gini coefficient provides a measure of (a) (b) (c) (d) (e) The level of poverty. The level of relative inequality. Disguised unemployment. The rate of growth. None of the above.
A.7
The marginal propensity to consume is usually expressed as
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(a) (b) (c) (d) (e)
A pure number. Paise per unit of time. Rupees per unit of time. A number per unit of time. None of the above.
A.8
Which of the following is a necessary and sufficient condition for consumers equilibrium? (a) (b) (c) (d) (e) Marginal rate of substitution is equal to the price ratio. Marginal rate of substitution is equal to the price ratio, if all goods are being purchased at equilibrium. Marginal rate of substitution is equal to the price ratio, provided marginal rate of substitution is diminishing. Marginal utilities are equal to prices. None of the above.
A.9
During the Great Depression. (a) (b) (c) (d) Unemployment and prices increased, and output decreased. Unemployment, and output and prices decreased. Unemployment and prices decreased, and output increased. Unemployment and output decreased, and price increased.
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(e)
Unemployment and output increased, and prices decreased.
A.10
Suppose two fair, six-sided dice are relied. The probability of obtaining a value from the first die that is equal to the value from the second die is(a) (b) (c) (d) (e) 1/6 5/18 9/12 1/12
A.11
Which of the following is not a leak from the circular flow of income/expenditure? (a) (b) (c) (d) (e) Taxes. Transfers Net imports Savings None of the above.
A.12
CENVAT is related to (a) (b) Sales Tax. Excise Duty.
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(c) (d) (e)
Customs duty Service Tax None of the above.
A.13
According to official estimates, the proportion of people living below the poverty line in India is (a) (b) (c) (d) (e) Below 15 per cent Between 15 and 25 per cent. Between 25 and 35 per cent. Between 35 and 25 per cent. Above 45 per cent.
A.14
If E(x2) = 16 and var (X) = 4, then E{(2 + 3X)2} is approximately equal to (a) (b) (c) (d) (e) 123 156 143 150 None of the above.
A.15
GDP equals GNP, when
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(a) (b) (c) (d) (e)
The value of exports of goods equals the value of imports of goods. The value of exports less imports equals the net flow of invisibles into the country. The value of exports of goods and services equals the value of imports of goods are services. There are no net factor incomes from abroad. None of the above.
A.16
The relationship between the stock of money and the stock of high-powered money is (a) (b) (c) (d) (e) Determined solely by the reserve-deposit ratio. Determined solely by the currency deposit ratio. Between zero and one. The money multiplier. The income velocity of money.
A.17
GDP does not include (a) (b) (c) (d) Government spending to clean up pollution caused by factories. Payments to technical consultants abroad. Additions to inventory stocks of intermediate goods. Additions to inventory stocks of final goods.
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(e)
None of the above.
A.18
The elasticity of a variable X with a variable Y is a constant. Therefore (a) (b) (c) (d) (e) X is a linear function of Y X is a linear function of in Y In X is a linear function of Y In X is a linear function of in Y None of the above.
A.19
Suppose only a single firm has the technology to produce a commodity for which the demand curve is perfectly elastic. Total variable cost of the firm increases more than proportionally with firm output. Which of the following conditions must necessarily be true for the firm at equilibrium? (a) (b) (c) (d) (e) Average revenue = Marginal cost. Average revenue > Marginal cost. Average revenue > Average cost. Average revenue > Marginal revenue None of the above.
A.20
The student discovers that the marks she has obtained (63 out of 100) in a recent test was the 73rd percentile in the frequency distribution of test scores. Suppose 1000 students wrote the test. This means that
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(a) (b) (c) (d) (e)
At least 73 per cent of the students got 73 or more At least 270 students got 63 or more At least 270 students got 63 or less. At least 27 per cent of the students got 73 or more None of the above.
A.21
An investment is worth making, if over the lifetime of the project (a) (b) (c) (d) (e) Cash inflows are positive Net cash inflows (inflows minus outflows) are positive Cash inflows discounted by an appropriate rate of interest are positive Net cash inflows (inflows minus outflows) discounted by an appropriate rate of interest are positive. None of the above.
A.22
The acceleration principle states that the rate of investment in the economy is proportional to (a) (b) (c) (d) The rate of increase in aggregate demand The rate of increase in unplanned inventories The rate of increase in business savings The rate of increase in the rate of profit.
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(e)
None of the above.
A.23
The Marshall Lerner conditions relate to the effect on the balance of trade of (a) (b) (c) (d) (e) Deflation. Deindustrialization. Depression. Devaluation. None of the above.
A.24
Suppose a market demand curve for an individual is given by q = 100 p. The market price prevailing is 50. The supplier of the units is a monopolist and wants to perform first degree price discrimination. He will then (a) (b) (c) (d) (e) Charge a price of 50 for all units. Charge a price of 60 for the first 25 units and a price of 50 for the rest. Charge a price of 1250 per unit. Setup a two-part tariff in pricing and charge the consumer a flat fee of 1250 and a price of 50 per unit. Set up a two part tariff in pricing and charge the consumer a flat fee of 1250 and a price of 60 per unit.
A.25
The production function Q = x11/2 x21/3, where Q is output and x1, x2 are quantities of inputs, reflects
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(a) (b) (c) (d) (e)
Constant returns to scale. Increasing returns to scale. Decreasing returns to scale. No returns to scale. None of the above.
PART B B.1 If the short-run average cost for a firm is given by (Q 15) 2 + 4, where Q stands for units of output, then compute the level of output at which short-run marginal cost is equal to average cost.
B.2
Does the following maximization problem have a solution? Maximise x2 subject to 0 < x < 1 Explain your answer.
B.3
In a two-good economy, the utility function is given by U(x, y) = min (x, y). The prices of both x and y are Re 1 per unit. The consumer has a budget of Rs.100. What is his optimum consumption bundle?
B.4
Consider an economy operating at less than full employment, in which the government has a balanced budget. The marginal propensity to consume is 0.8 and the GDP falls short of full employment output by 5000.
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(a) (b)
What is the minimum required increase in government spending that could bring about full employment in a closed economy? How would this change in an open economy if exports are constant and the economy has an import propensity of 0.2?
B.5
Construct an example to prove that the following argument is incorrect A and B are two non-empty sets of positive integers. If B contains a number, then A contains the same number. B does not contain the number 2. Therefore, A does not contain the number 2.
B.6
In a closed economy in which the GDP is growing at 7 per cent per annum and the population at 2 per cent per annum, the income elasticity of demand for food is 0-4. If food prices are determined by demand and supply, at what rate must food supply increase, if the price of food is to remain constant?
B.7
In an economy with only two goods X and Y, the price of X increased from 1 in period 1 to 1.5 in period 2, while that of Y remained constant at 1. Consumer A consumed 2 units of X and 3 units of Y in period 1, and 3 units of X and 2 units of Y in period 2. Consumer B consumed 3 units of X and 2 units of Y in period 1, and 1 unit of X and 3 units of Y in period 2. Assuming that tastes of these two individuals have not changed, which individual is clearly better off in period 2 compared to period 1?
B.8
Consider the following components of the balance of payments:
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Merchandise trade account Invisibles account. Capital account.
State the category to which each of the following transaction belongs (Write None of the above if none of the above accounts is applicable): Import of chocolate Export of software Change in official reserves External commercial borrowing Tourism abroad Royalty payments for technology Unilateral transfers in the form of workers remittances. Import of capital equipment Purchase of foreign securities. Loans from the World Bank.
B.9
If a and b are two positive numbers, define their arithmetic mean and their geometric mean. Prove that the arithmetic mean cannot be less than the geometric mean.
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B.10
A 10 kg basket of Royal Delicious Grade A apples sells for $ 15 in the US, and the same apples are priced in India at Rs. 100 per kg. The nominal exchange rate is Rs. 50 per US dollar. (a) (b) What is the real exchange rate based on apples alone? Comment on using the above real exchange rate as an indicator of Purchasing Power Parity.
PART C C.1 Consider the following passage : One of the things which we have learned a general point which must be emphasized at the outset is to distinguish between those historical questions which can be usefully discussed in terms of the notion of statistical uniformity and those which cannot. Every historical event has some aspect in which it is unique, but nearly always there are other aspects in which it is a member of a group, often of quite a large group. If it is one of the latter aspects in which we are interested, it will be the group, not the individual, on which we shall fix our attention, it will be the average, or norm, of the group which is what we shall be trying to explain Economics is rather specially concerned with such statistical behavior. The historical phenomena to which a theory of history might apply are those which in the light of our interest in them, can be regarded as having this statistical character. Most of the phenomena of economic history (however widely considered) do have it; the questions want to ask about economic history deal mainly with groupings that can be made to possess it. But the distinction is not, in principle, a distinction between economics and other kinds of history. The distinction is between an interest in general phenomena and an interest in particular stories. Whenever our interest is in general phenomena, theory (economic or other social theory) may be relevant; otherwise usually not. J.R. Hicks (a) (b) How many attributes of historical events does Hicks identify? What is the fundamental basis of distinction between these attributes?
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(c) (d) (e)
What is the reason for making this distinction? According to Hicks, what feature do most phenomena of economic history have? According to Hicks, when is theory relevant?
C.2
Consider the following table with data on GDP by sectors: SPACE FOR TABLE.
(a) (b)
Between 1990-91 and 2006-07, which sector grew most rapidly and which most slowly in current price terms? Was it the same in constant price terms? How did the share of the agriculture and services in total GDP change between 1990-91 and 2006-07? Answer for both constant and current price terms. Was the growth of industry faster, slower or the same as that of aggregate GDP over the entire period? Calculate the implicit price deflator for agriculture in 2000-01 and for services in 2006-07.
(c) (d)
C.3
Consider an economy wherein equilibrium Y = C + 1 M and C = 0.75 Y, where M = 0.2 C + 0.4 I and I is autonomously determined. (a) (b) What is the value of the investment multiplier in the economy? If the maximum value of imports of goods and services which the economy can finance is 60000 units of the economys currency, what is the maximum value of Y possible in such an equilibrium?
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(c)
Suppose the economy can finance an additional 1 currency unit of imports. What is the increase in the maximum possible value of Y?
PART D (a) (b) (c) (d) (e) Is it correct to argue that the current global financial crisis was caused by financial deregulation? Under what conditions can high aggregate income growth be accompanies by increased poverty? Is labour market inflexibility responsible for show industrial growth in India? What factors explain the recent rise and decline in global food prices? What are the assumptions and the basic propositions made in the Lewis twosector growth model?
ENTRANCE EXAMINATION, 2009 M.A. ECONOMICS 1. Consider a consumer with a utility function U(x1, x2) = e1xi+in x2)1/3, x1 > x2 0, x2 0 (a) (b) Does the above function satisfy the standard properties of utility function? 6
Let p1 and p2 be the prices of goods 1 and 2 respectively and m denote the income of the consumer. Solve for the consumers Marshallian demand functions. 10 (Hint: You could transform the utility function to make it easier to solve)
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(c)
Will the demands for both the goods be, necessarily, strictly positive?
2.
(a)
Given deposits (D) of Rs.900 billion, total money supply (M S) of Rs.1,800 billion, reserve ratio, 9, of 0.2 and ratio of currency to money demand of 0.5. (i) (ii) (iii) Find the demands for currency (C), reserves (R) and deposits in equilibrium. 2 Find the money multiplier, m, If the central bank wants to decrease the money supply by Rs. 500 million (in order to raise the interest rate), what amount of bounds would it have to buy/sell? 3 Money multiplier, like Keynesian multiplier, is applicable under a condition of less than full employment. Write True or False. Five reasons. (Note: 1 billion = 1000 million). 3
(iv)
(b)
What is the paradox of thrift? Does it arise in the classical model? If yes, why? If no, why not? 10
3.
(a)
State the assumptions of the Heckscher-Ohlin theory of international trade. Distinguish the Heckscher-Ohlin theory from the Ricardian theory of trade. Examine some possible consequences of trade on factor rewards and commodity prices. 10 Under what conditions, would currency devaluation have a positive effect on trade balance? Provide a mathematical derivation. 10
(b)
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4.
(a) (b)
Find the area bounded by the curve |x|+y=1 and the x-axis. Plot its graph. 10 (i) In a random experiment, two dice are rolled simultaneously, and their face values are noted. Event A is said to occur when a six is obtained in the second die and event B is said to occur when a total of seven is obtained. Verify whether events A and B are independent and whether they are mutually exclusive. 5 Let X be a random variable with mean u and variance o 2. Show that E(X-b)2, as a function of b, is minimized when b=u. 5
(ii)
5.
Answer any one of the following questions (in not more than 300 words): (a)
20
Examine under what conditions the transfer of labour from agriculture to industry may not have any impact on agricultural productivity. Do you think that trade liberalization is likely to enhance the process of industrialization in India? Substantiate your arguments. Do you agree with the view that outsourcing is the result of increasing protectionism in the developed world? Examine as to how outsourcing could be justified from a developing countrys viewpoint.
(b)
ENTRANCE EXAMINATION, 2008 M.A. ECONOMICS
SECTION A Answer all questions. Each question carries 1 mark
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A.1
Answer twenty-five articles, nine are defective, six having only minor defects and three having major defects. Determine the probability that an article selected at random has major defects given that it has defects. (a) (b) (c) (d) (e) 1/3 6/25 2/25 None of the above.
A.2
A standard normal distribution has (a) (b) (c) (d) (e) mean equal to 1 and variance equal to 1 mean equal to 0 and variance equal to 1 mean equal to 0 and standard deviation equal to 0 mean equal to -1 and variance equal to 1 None of the above.
A.3
In a given group, the correlation between height, measured in feet, and weight, measured in pounds, is +4.68. Which of the following would after the value of r? (a) (b) (c) If height is expressed in centimeters If weight is expressed in kilograms Both of the above will affect r.
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(d) (e)
Neither of the above changes will affect r. None of the above.
A.4
If a workers marginal product of labour is 6 units of the good per hour and the price of the good is Rs.5, what is the highest hourly wage that a firm can pay her? (a) (b) (c) (d) (e) Rs. 11 Rs.1 Rs. 30 Rs. 6 Rs. 5
A.5
The optimal point on the production Possibility Frontier (PPF) depends on (a) (b) (c) (d) (e) Efficiency Preferences Feasibility All of the above None of the above.
A.6
Suppose a technological advance in toothpaste manufacturing reduces the cost of producing each tube by Re 1. What will be the effect on supply? (a) Quantity supplied will increase.
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(b) (c) (d) (e)
The supply curve will shift inward. There will be no change in supply Demand will go down since there will be less toothpaste supplied. The supply curve will shift outward.
A.7
Haris total spending on grapes rises when the price falls from Rs.2/kg to Re 1/kg. What can we say about the price elasticity of his demand for grapes? (a) (b) (c) (d) (e) It is greater than 1 It is less than 1 It is equal to one All of the above None of the above.
A.8
Last year, Priya bought 6 pairs of shoes when her income was Rs. 40,000. This year, her income is Rs 50,000, and show purchased 10 pair of shoes. Priya (a) (b) (c) (d) (e) treats shoes as an inferior good treats shoes as a luxury good prefers shoes to boots has a price-inelastic demand for shoes has a price-elastic demand for shoes.
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A.9
When an economist refers to the long-run, she is referring to (a) (b) (c) (d) (e) a length of time no shorter than 2 years a length of time no shorter than 1 month approximately the length of time such that all inputs remain flexed approximately the length of time such that all inputs are variable a marathon as opposed to a mile.
A.10
Aparna makes chocolates. If the total cost of 10 chocolates is Rs 10, and the total cost of 30 chocolates is Rs 20, what does this tell us about the marginal cost of producing the 31st chocolate? (a) (b) (c) (d) (e) It will be greater than Re 0.50 It will be less than Re 0.50 It will be exactly Re 0.50 It will revert to Re 1 Any of the above is possible.
A.11
Indias current annual income per head of population (i.e. net national product per capita at factor cost), as given in the Economic Survey, 2008, is in the region of (a) (b) Rs. 16,000 Rs. 33,000
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(c) (d) (e)
Rs. 22,000 Rs. 12,000 Rs. 40,000
A.12
If X1, X2, , Xn are non-negative real numbers, then (a) (b) (c) (d) (e) Arithmetic Mean < Geometric Mean Geometric Mean Arithmetic Mean Arithmetic Mean = 0.5 (Geometric Mean) There is no fixed relationship between Arithmetic Meanand Geometric Mean None of the above.
A.13
If (a / b) > (b / c), then (a) (b) (c) (d) (e) ac > b2 ac < b2 ac = b2 No inference can be made regarding the relative magnitude of ac and b2. None of the above.
A.14
Let (x) = (log (x)) / x, where 0> x < 1. Then for all x such that 0 < x < 1
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(a) (b) (c) (d) (e)
(x) < 0 (x) > 0 (x) > 0, if 0 < x < 0.5 and (x) < 0, if 0.5 x < 1 cant say anything about the sign of (x) None of the above.
A.15
Given two numbers, a = (37 + 4 7)2 and b = 343, which of the following must be true? (a) (b) (c) (d) (e) a>b b>a a=b a = b/2 None of the above.
A.16
Beenas average score after B class tests is 84.In her first seven class tests Beenas average score was 85. In her last class test Beena has scored. (a) (b) (c) (d) 82 87 96 77
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(e)
None of the above.
A.17
The Sub-Prime Lending crisis originated in (a) (b) (c) (d) (e) India USA UK Australia None of the above.
A.18
A fair die has given the number 6 on five consecutive throws. What is the probability that the next throw will also give the number 6? (a) (b) (c) (d) (e) 0 1/30 1/6 5/6 None of the above.
A.19
The number 0.999999 is (a) (b) exactly equal to 1 slightly less than 1
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(c) (d) (e)
slightly more than 1 All of the above. None of the above.
A.20
Let S -= 1 +1/2 + 1/3 + + . Then S is equal to (a) (b) (c) (d) (e) 2 4 6 1 The sum does not converge to any finite value.
A.21
Suppose A, B and C are three non-empty sets such that B... C and (C A) . B = . Which of the following statements is then necessarily true? (a) (b) (c) (d) (e) .. .. .. None of the above.
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A.22
Suppose anyone but the minimum of a set of 10 positive real numbers is replaced by a number which is greater than it. It the range of a set of numbers is taken as the measure of inequality amongst the numbers in that set then after replacement. (a) (b) (c) (d) (e) inequality will increase inequality will decrease inequality cannot increase inequality cannot decrease None of the above.
A.23
If a riskless bond promises a fixed annual payment of Rs. 35 in perpetuity and the current market rate of interest is 7% per annum then the market value of the bond is (a) (b) (c) (d) (e) Rs. 50 Rs. 500 Rs. 5000 Rs. 2450 None of the above.
A.24
In W. Arthur Lewis model of growth in a dual economy the rate of growth of the money wage rate in the modern sector is (a) (b) zero constant
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(c) (d) (e)
equal to the rate of inflation determined by the rate of growth of the labour force None of the above.
A.25
If every unit increase in a variable X is associated with a half unit decrease in a variable Y, then the correlation coefficient between X and Y is (a) (b) (c) (d) (e) 1 0.5 0.5 1 None of the above.
A.26
Suppose the utility function of a person I U(x, y) = 16x + 13y, where x and y are the quantities consumed of two commodities X and Y. If the unit price of X is Rs. 13 and the unit price of Y is Rs. 11, in equilibrium the household will choose a commodity bundle (a) (b) (c) (d) (e) containing only X containing only Y containing both X and Y containing at least some Y None of the above.
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A.27
Over the last two years the US Dollar has been (a) (b) (c) (d) (e) appreciating with respect to other major currencies depreciating with respect to other major currencies showing no trend with respect to other major currencies All of the above None of the above.
A.28. The terms of trade for a country refers to (a) (b) (c) (d) (e) the ratio of its currency to other currencies the ratio of its export prices to import prices the ratio of the value of its exports to the value of its imports the ratio of its export production costs to import production costs None of the above.
A.29
If an individual, deposits a sum of money in a bank, then the amount of additional credit that the banking system can create is (a) (b) (c) a fraction of that sum defined by the cash reserve ratio a fraction of that sum defined by the statutory liquidity ratio a multiple of that sum defined by the cash reserve ratio
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(d) (e)
a multiple of that sum defined by the statutory liquidity ratio None of the above.
A.30
Which of the following constitutional amendments deals with the Panchayati Raj Institutions? (a) (b) (c) (d) (e) 43rd Amendment 73rd Amendment 86th Amendment 93rd Amendment 2nd Amendment
SECTION B Answer all questions. Each question carries 3 marks B.1 You are given the following data for a country. S and I refer to private savings and investment, G and T to government expenditure and Tax revenues, and X and M refer to Exports and Imports of goods and services: Year 205 2006 2007 The missing values in the table above are (a) G-T=0, X-M=-80 and S-I = 145 XM 150 -200 GT -50 345 S-I 150 -130
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(b) (c) (d) (e)
G-T=0, X-M = 80 and S-I = 145 G-T = 80, X-M = 0 and S-I = 145 G-T = 0, X-M = 0 and S-I = 145 G-T = 0, X-M = 80 and S-I = -145
B.2
A population consists of the numbers [2003, 1999, 2001, 1997, 2000, 2005, 1995]. The variance of the population is (a) (b) (c) (d) 11.6 the mean deviation 10 2010
B.3
Suppose Rs. 1,00,000 are deposited in an account for five years at an interest rate of 10% per year, to be compounded annually. How much money would be there at the end of 5 years? (a) (b) (c) (d) Rs. 1,61,051 Rs. 1,60,000 Rs. 1,51,051 Rs. 1,50,000
B.4
If you integrate the function (x) = 1 / x from 1 to 3, you get
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(a) (b) (c) (d)
0 2 Log 3 None of the above.
B.5
If a < b + , for all > 0, then (a) (b) (c) (d) a<b ab a>0 Cant say anything from the given information.
B.6
A monopolist faces a demand curve q(p) = 1 / p. He incurs a cost of Rs. 3 per unit of output produced. There is no fixed cost. His optimal output choice is (a) (b) (c) (d) 2 3 0 No, such optimal output exists.
B.7
Suppose aggregate income in an economy is equal to total wages plus total profits. 40% of all profits are saved. If the share of wages in aggregate income is 60% and
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the rate of saving in the economy is 0.25, the fraction of wages saved in the economy is (a) (b) (c) (d) 0.09 0.15 0.16 0.24
B.8
Suppose in an economy Y + C + 1, C = 500 + 0.8Y, I = 1000, supply of money M 5 = 1000, transaction demand for money MDT = 0.1Y, speculative demand for money MDS = 1000 75r, where r is the percentage rate of interest. What is the equilibrium value of r in the economy? (a) (b) (c) (d) 0.05 0.1 5 10
B.9
Suppose that the exchange rate of the Indian rupee appreciates by 10 per cent relative to the currencies of Indias trading partners. Over the same period, Inflation in India is 8 per cent compared to 3 per cent inflation in the trading partners. What is the change in Indias real exchange rate? (a) (b) (c) 5 per cent appreciation 10 per cent appreciation 15 per cent appreciation
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(d)
5 per cent depreciation.
B.10
A stratified sample of households is selected for a survey. The population is divided in two strata and 25 per cent of households in stratum A and 10 per cent of households in stratum B are selected through a process of random selection. Data collected in the survey show that the income of sample households are as follows: Stratum A : Stratum B : 2000; 1000; 3000; 4000; 5000 500; 100; 200; 300; 400; 100
The average income of households in the population is (a) (b) (c) (d) 1509 1650 950 None of the above.
SECTION C Answer any four questions. Each question carries 10 marks. C.1 The following date are given for an economy for a particular year: Rs. (in crores) GDP at Factor Cost Net Factor Income from Abroad Net Indirect Taxes 10,000 500 1,500
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Government (Non-Investment) Expenditure at Market Prices. Current Account Deficit on Balance of Payments. Gross Savings of Government. (a) (b) (c) (d) (e) (f) Calculate GDP at market prices. Calculate GNP at market prices.
1,500 500 - 300
If private consumption expenditure is 0.75 times the GNP at market prices, calculate Gross Investment. Calculate Gross Savings in the economy. Calculate Gross Private Savings in the economy. Calculate the private sectors savings ratio out of hits disposable income.
C.2
Consider the following text: The main point is that technical change and capital accumulation go hand in hand, and it is not really possible to isolate the effects of increased knowledge or ability or know-how from the effect of accumulation of capital. Nor is it possible to distinguish, in general, the technical change which is the result of some brand new discovery from that which merely represents an increase in know-how in the ability to use and exploit knowledge which has already existed, in some shape or another, in the minds of some people. Further, just as technical progress causes accumulation, the process of accumulation stimulates the growth of knowledge and of know-how. Hence it is useless to analyse the effects of capital accumulation in terms of production function which assumes a given state of knowledge, and then assumes that this function continually shifts upwards with the progress of knowledge. (Nicholas Kaldor) Based on this text answer the following: (a) What are the types of technical change that the author mentions here?
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(b) (c) (d) (e)
What is the relationship between technical change and capital accumulation? Can the effects of technical change be clearly distinguished from the effect of capital accumulation? What kind of production function does the author feel is not useful in analyzing the effects of capital accumulation? Why is such a production function not useful in this way, according to the author?
C.3
There were four candidates, namely, A, B, C and D, for an award. (i) (ii) (iii) (iv) (v) (vi) (vii) (viii) (ix) (x) Only one of the four candidates had a distinction both in Mathematics and Literature. Only one candidate had a distinction both in Mathematics and Philosophy. Only one candidate had a distinction both in Mathematics and History. Only one candidate had a distinction both in Literature and Philosophy. Only one candidate had a distinction both in Literature and History. Only one candidate had a distinction both in Philosophy and History. Both A and B had a distinction in Mathematics. Both C and D had a distinction in Literature. Both B and C had a distinction in Philosophy. D had a distinction in History.
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The award was given to the candidate who had distinction in more subjects than any other candidate. Which candidate was given the award? (Show the steps of your answer.)
C.4
A chocolate bar has been stolen by either child A or child B. One of A and B is innocent. Hence are the statements of witnesses and other interested parties C: D: E: F: G: H: I: J: K: L: A has not stolen the chocolate bar. A has stolen things in the past. B has stolen things in the past. E has stolen things in the past. D and E are both right. D and F are both right. E or F is right, and may be both. G or H is right, and may be both. D and I are both right. J is right and K is wrong.
Suppose that C and L are either both telling the truth or both lying. Who stole the chocolate bar? (show the steps of your answer).
C.5
One of A, B, C and D has committed a crime with the help of another one of them. Here are the statements given by the four individuals. The statements of the criminal and his accomplice are false and those of the remaining two are true.
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A: B: C: D:
If B is guilty of something, then C must be innocent. If A is innocent, then C must be guilty. If B was the killer, then D must have had nothing to do with the crime. I am innocent.
Which of the four is the criminal and who was his accomplice? (Show the steps of your answer).
C.6
Show that log (x) < x for all x > 0. Here log (x) stands for natural logarithm.
ENTRANCE EXAMINATION, 2008 M.A. ECONOMICS 1. Agricultural subsidies are given by almost all countries with the objective of raising the income of farmers. Under the US deficiency payment system, a price above the free market price, p, is guaranteed by paying to the farmer the difference between the market clearing price and p. Alternatively, the government (as in India) can buy the farmers production till price is pushed to the p level. Show that which scheme will cost more will depend on the elasticity of demand for the product. 10 A natural monopolist has total cost C(Q)=400+250, and faces the market demand Q=200-2P.Solve for the monopolists profit, output and consumer surplus when (a) (b) (c) price is set equal to marginal cost; price is set equal to average cost; there is two part pricing. That is, the monopolist sets the price equal to marginal cost and charges a fixed participation fee per consumer. Assume
2.
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that the demand comes from 10 identical consumers. What participation fee would a profit maximizing monopolist set? 10
3.
Consider the production function (z1, z2) = z1 + z2 Where z1 and z2 are the quantities of input 1 and input 2, respectively. Let p, w 1 and w2 be the prices of the output, input 1 and input 2, respectively. Derive the profit function, supply function and factor demand functions. 10
4.
What is the difference between cash reserve ratio (CRR)and capital adequacy ratio (CAR) in a banks balance sheet? What specific role does each play in policies of the central bank? A reduction in money wages would lead to a rise in aggregates output and income. Discuss the Keynesian explanation to this phenomenon. 10 (a) The demand function for a product is q=15-3p1/2. Find the loss of consumer surplus resulting from a ban on purchase of this product if its current price is p=9. Consider a differentiable function f(x) such that f(c1)=f(c2)=0 , c2>c1 f(c1)=5 , f(c2)=10 f(c1)=f(c2)<0 , f(c1)<f(c2) Find the minimum number of roots of f(x)=0 in the interval [c 1-,c2+ ], where is a small positive number. Hint: You may use graphical method. 10
5. 6.
(b)
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7.
(a)
X is a random variable of the continuous type with the following probability lensity function. f(x)=1/4-x/16, -2<x<2 =0, elsewhere 8
Drive the cumulating distribution function of X, denoted as F(x). (b)
Two computers A and B are to be marketed. A salesman is assigned the job of finding customers for them. He has 60% and 40% chances of being able to sell computer A and computer B, respectively. The success in selling one is independent of the success in selling the others. Given that he is able to sell at least one computer, what is the probability that computer A has been sold? 7 20
8.
Answer any one following questions (in not more than 300 words): (a) (b)
Stock market capitalization now exceeds the amount of bank deposits in India. What are the reasons for this? In India the export of IT-services has exhibited remarkable growth during the last decade. Analyze this phenomenon in the Heckscher-Ohlin framework. Section-A
Answer all questions. Each question carries 1 mark A1. If x, y are real numbers and it is known that x, y<2 (the product of x and y is less than 2), then it MUST be the case that (a) (b) (c) x, y are both less than 2 x, y are both positive at least one of x and y is positive
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(d) A2.
at least one of x and y is less than 2
Let x, y and z be arbitrary real numbers. Then we must have (a) (b) (c) (d) if x>y, then x. z>y. z if x>y, then x-z>y-z if x>y, then x/z>y/z if x>y, then 1/x>1/y
A3.
Suppose n observations of variable yield n different values with median m. suppose the observations with the maximum value and the minimum value are omitted. The median of the remaining n-2 observations is (a) (b) (c) (d) >m <m <m None of the above
A4.
If there are N distinct real numbers in a set A and their arithmetic mean is 0, then it MUST be the case that (a) (b) (c) 0 is a member of A The sum of all non-negative numbers of A is equal to the absolute value of the sum of all non-positive numbers N must be even and the number of non-negative numbers in A must be the same as the number of non-positive numbers in A
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(d)
N is odd, A includes 0 and the number of non-negative numbers in A is equal to the number of non-positive numbers in A
A5.
Consider the function y=x3 defined in the interval I= [-1, +1]. X=0 is (a) (b) (c) (d) A point of local maximum in I A point of local minimum in I A point of local inflexion in I A point of global extremum in I
A.6.
Suppose an unbiased dice is thrown repeatedly thirty times under identical conditions. What is the expected number of thrown in which the outcomes will be an even number greater than two or an odd number less than four? (a) (b) (c) (d) Eight Twelve Twenty Twenty four
A7.
In a frequency distribution, what percent of the total number of observations lies between the first and third quartiles? (a) 50
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(b) (c) (d)
68 75 The question cant be answered without knowledge of the specific distribution
A12.
The long-run cost function for a commodity sold in a perfectly competitive market is given by C(q)=q3-2q2+2q. the equilibrium price of the commodity in the long run is (a) (b) (c) (d) 4 2 1
A13.
Suppose a monopolist firm faces a demand curve given by D(p)=1-p, where p is the unit price of the firms product in rupee. If the firms output in short -run equilibrium is 0.1 unit, what is the marginal cost of the firm at the equilibrium levels of output? (a) (b) (c) (d) 0-8 0-9 1-0 1-1
A14.
Suppose that the nominal interest rate of an economy is 10%, the inflation rate 5 percent, and the tax rate from interest 40%. The after-tax real rate of interest will be
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(a) (b) (c) (d)
1% 2% 3% None of the above
A15.
Mr. A uses his salary of Rs 2 lakhs of a month to buy AT&T shares to earn dividend. Mr. B borrows Rs.2 lakhs from the bank to buy a new machine to expand his business. Mr. c deposits his salary of Rs 2 lakhs of a month in a term deposit bank account to earn long-term interest. In macroeconomics, the action of A, B and C will be characterized as (a) (b) (c) (d) A: investment, B: investment, C: saving A: investment, B: investment, C: investment A: saving, B: investment, C: saving A: investment, B: saving, C: investment
A16.
If the excess of private sector saving over investment in a year in an economy increases by Rs.700 crores, the net saving of the government sector in a yeardecreases by Rs 850 crores and the annual value of import of goods and services increases by Rs.600 crores, what is the change in the annual value of export of goods and services in the economy? (a) (b) (c) Increases by Rs 450 crores Increases by Rs 750 crores Decreases by Rs 450 crores
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(d) A17.
Decreases by Rs 750 crores
Suppose Japanese shareholders own 49% and Indian shareholders 51% of the shares of a firm producing automobiles in India. The profit earned by Japanese shareholders of the firm form (a) (b) (c) (d) Part of Indian GDP and part of Japanese GNP Part of Indian GDP and part of Indian GNP Part of Indian GNP and part of Japanese GNP None of the above
A18.
In the Is-LM model of an economy, if the economy is in a liquidity trap and aggregate investment expenditure is unaffected by current income, a rise in government expenditure (other things remaining constant) would lead to a rise in the equilibrium value of (a) (b) (c) (d) The demand for money The rate of interest Aggregates savings Aggregate investment
A19.
In an economy where all commodities are produced with labour alone, 0.5 unit of labour is required to produce a unit of commodity A and 1.0 unit of labour is required to produce a unit of commodity B. If the international price of B is 2.5 units of A (and unaffected by how much the economy trades), and if the total amount of labour in the economy is 100 units, how much of the commodities will the economy produce? (a) 200 units of A, 0 unit of B
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(b) (c) (d)
57.14 units of A, 71.04 units of B 57.14 units of B, 71.04 units of A 0 unit of A, 100 units of B
A20.
Which of the following is true for the government budget? (a) (b) (c) (d) The revenue deficit is always less than the budget deficit The revenue deficit is always less than or equal to the budget deficit The revenue deficit is always greater than or equal to the budget deficit None of the above
A21.
The value Added Tax is (a) (b) (c) (d) a direct tax an indirect tax a partly direct and partly indirect tax a new type of tax, neither direct non indirect
A22.
Consider a closed controlled economy with unlimited supplies of labour in which the incremental capital-output ratio is 4 and the rate of population growth is 1.5% per annum. If the economy wants to attain a growth rate of per capita income of 6% per annum, what must be the saving rate (in percent) in the economy? (a) 24
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(b) (c) (d)
27.5 30 36
A23.
Which of these used in calculating the human development index? (a) (b) (c) (d) Level of income measured by per capita GDP Educational attainment measured by literacy and school attendance Condition of health measured by life expectancy All of the above
A24.
In 2006-07, the National Rural Employment Guarantee Programme entitled (a) (b) (c) (d) 100 days of employment to all rural families in 200 districts of India 100 days of employment to all adult in 200 districts of India 100 days of employment to all rural families in India 100 days of employment to all adults in India
A25.
Saving rate in India is (a) (b) About 10 percent About 30 percent
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(c) (d)
About 50 percent About 70 percent
SECTION-B Answer any nine questions. Each question carries 5 marks B1. Sketch a graph of the function y = (x) = loge x on the interval [1, 2]. Find the value of z > O such that i(2) = loge 2 (the prime denotes a derivative, as usual). Prove that z is in the interval [1, 2]. (a) Suppose Rs. 1,00,000 is deposited in an account for 3 years at 11% rate of interest per year, compounded annually. How much money would be there at the end of 3 years? Suppose that the market rate of interest is 11% per annum. Which of the following two options would you prefer? Option I : You receive Rs. 1,11, after one year.
B2.
(b)
Option II : You receive Rs. 55 after six months and Rs.55 after one year B3. A computer has two processors. The probability that processor one works is and the probability that processor two works is 7/8. The computer will function if processor one works, or processor two works or both processors work. Find the probability that processor one is working, given that the computer is functional. Let X be a random variable denoting the prison sentence (in years) for people convicted of car theft. Suppose that the maximum sentence for stealing a car is three years and that the probability density function of X is given by (x) = (1/9) x 2. What is the expected prison sentence on being convicted for stealing a car? Let a consumer purchase the bundle Q0 = (q01, , q0n) at prices p0 = (p01, p0n) and the bundle Q1 = (q11, , q1n) at prices p1 = (p11, p1n). The following price index numbers may be defined:
B4.
B5.
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Space for figure
Now show that (a) (b) If Y > P1, then the consumer is no-worse off at (p1, Q1); If Y < Pp, then the consumer is no better off at (p1, Q1.
B6.
In a competitive market, the demand and supply curves of a product are given by qd = 200 p and q2 = (1/2) p 25. There is an imposition of commodity tax of 30 per unit on the output. Calculate the pre-tax and the post-tax equilibrium price and output. Also find out the incidence f tax burden on consumer and producer per unit of output. Suppose there are 4 alternative, x, y, z and w. Further suppose that there are 7 individuals, 1, 2, 3, 4, 5, 6 and 7. The individuals rankings (orderings) of the four alternatives, Ri, I = 1, , 7 are given by R1 : R2 : R3 : R4 : R5 : R6 : R7 : (xy) zw yzwx zw(xy) (xy) (zw) yzwx zw(xy) (xy) (zw)
B7.
Determine which of the alternatives are Pareto-optimal. Explain your answer.
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[Notation : Alternatives inside the parentheses are indifferent to each other. If an alternative is written to the left of another alternative, then the former is preferred to the latter.]
B8.
Suppose the money demand function of an economy is Md/P = 1000 100r Where Md is the quantity of money demanded, P denotes the price level and r the rate of interest (in percentage). Let M denote the exogenously determined quantity of money in circulation. (a) (b) (c) Find the equilibrium interest rate if M = 1000. P = 2. What happens to the equilibrium interest rate if the supply of money is raised from 1000 to 1200? If the Central Bank of the economy wants to raise the interest rate to 7 percent, what money supply should it set?
B9.
In an economy where 20 percent of income is taxed, consumption is 75 percent of post-tax income. If the level of investment is 500 and government expenditure is 1100, then (a) (b) (c) what is the level of income; what is the budget deficit; what will be the level of income when with unchanged investment and taxrate, government expenditure is such that the budget is balanced?
B10.
You are given the following information about the Indian Economy:
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SPACE FOR TABLE (a) (b) Which sector registered the highest productivity (output per worker) in 1990 and which showed the lowest? In what direction raise, fall, or neither did productivity change in these sectors over the period 1990 to 2005, and what change, if any, is seen in the ranking of the sectors by productivity comparing 2005 with 1990? Explain the economic reasons for the observed trends in output, employment and productivity.
(c)
SECTION D Answer all the questions of D1. This section carries 10 marks D1. It is true, that, when an individual saves he increases his own wealth. But the conclusion that he also increases aggregate wealth fails to allow for the possibility that an act of individual saving may react on someone elses savings and hence on someone elses wealth For although the amount of his own saving is unlikely to have any significant influence on his own income, the reactions of the amount of his consumption on the incomes of others makes it impossible for all individuals simultaneously to save any given sums. Every such attempt to save more by reducing consumption will so affect incomes that the attempt necessarily defeats itself. It is, of course, just as impossible for the community as a whole to save less than the amount of current investment, since the attempt to do so will necessarily raise incomes to a level at which the sums which individuals choose to save add up to a figure exactly equal to the amount of investment. (J. M. Keynes) On the basis of the above passage, answer the following questions: (a) (b) Can an individual increase his wealth by saving more? Can an individual increase aggregate wealth by saving more? Explain your answer in not more than two sentences of your own.
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(c) (d) (e) (f)
What happens when the community as a whole decides to save less than the current investment? Does an individuals decision to save more affect his own income? Can all individuals end up with a higher aggregate saving by deciding simultaneously to consume less and save more? Can all individuals end up with a lower aggregate saving by deciding simultaneously to consume more and save less?
PART A 1. The isoquants are taken to be download sloping because (a) (b) (c) (d) It is assumed that the marginal products are positive It is assumed that the marginal products are negative Constant returns to scale is assumed Of diminishing returns to factors
2.
The long-run equilibrium in a competitive industry is taken to be where (a) (b) Price=LRMC Price=LRAC
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(c) (d)
Price=min LRAC Price=min LRMC
3.
For a competitive firm, the short-run supply curve is given by (a) (b) (c) (d) Short-run MC curve Short-run MC curve above the short-run average cost curve Upward portion of the short-run average cost curve Upward portion of the short-run average cost curve above the short run average variable cost curve
4.
If x1,x2,..xn are non-negative real numbers, then (a) (b) (c) (d) Arithmetic mean > Geometric mean Arithmetic mean < Geometric mean Arithmetic mean=0.5 (Geometric mean) There is no fixed relationship between Arithmetic mean and Geometric mean
5.
In the rural economy of India cover the 1990s (a) (b) The rate of employment growth has been about the same as the rate of population growth The rate of employment growth has been greater than the rate of population growth
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(c) (d)
The rate of employment growth has been lower than the rate of population growth There is no data on employment in this period
6.
In a society with perfectly equality in the distribution of wealth, the Gini Coefficient will be (a) (b) (c) (d) 0 1 Infinity 0.5
7.
Assume that the saving propensity is 18%, incremental capital-output ratio is 5, population growth rate is 3%, there is no technical progress and there are constant returns to scale (a) (b) (c) (d) The warranted rate of growth is greater than the natural rate of growth The warranted rate of growth is lower than the natural rate of growth The economy will grow at 3% rate of growth The economy will grow at more than 3% rate of growth
8.
The tax GDP ratio of Government of India changed between 1991 and 2003 from (a) 8.5% to 15%
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(b) (c) (d)
15% to 8.5% 11% to 9.5% 9.5% to 11%
9.
The proposition that public investment crowds out private investment is based on the assumption that (a) (b) (c) (d) Public and private investment compete because they are invested in the same sector of the economy There already exists excess capacity in the public sector units There already exists excess capacity in the private sector units There is full employment of resources like labour and machinery
10.
The smoot-Hawley tariff wad significant because it affected (a) (b) (c) (d) Steel imports into the USA in 2001 Textile imports from the UK to the USA in 1928 Banana imports from the Caribbean to the USA in 1998 Most imports into the USA from 1930s
11.
The Charter Act referred to (a) (b) The Charter of demands drawn up by Paine in the American Revolution The act conferring monopoly trading rights on the East India Company
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(c) (d)
The peoples Charter drawn up by the Chartists in Britain in the 19 th century The common term for the Magna Carta
12.
Which comes closest to the stock of foreign exchange reserves in India now? (a) (b) (c) (d) Less than 25 billion dollars Between 25 and 50 billion dollars Between 50 and 75 billion dollars Greater than 75 billion dollars
13.
On whose idea was the second Five-year Plan based? (a) (b) (c) (d) P.C. Mahalanodis A.K. sen VKRV Rao None of the above
14.
Trend rate of growth of the index of industrial production during the 1990s as compared to the 1980s was (a) (b) (c) Close to double Almost the same Close to half
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(d)
None of the above
15.
Which of the following is not a measure of inequality (a) (b) (c) (d) Median Coefficient of variation Range Gini Coefficient
16.
The number of permutations of n distinct objects arranged in a circle is (a) (b) (c) (d) n! (n- 1)! (n- 2)! None of the above
17.
A customer makes a choice randomly and independently among three dishes A, B and C and there beverages X, Y and Z in a restaurant. She selects one dish and one beverage. What is the probability that she will select dish A and beverage X? (a) (b) (c) 2/3 1/3 1/6
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(d)
1/9
18.
The coefficient of variation of income of people in a country is %. Due to change in units of currency, everybodys income is doubled. The coefficient o f variation will now become (a) (b) (c) (d) 10 5 12 12/5
19.
Let x > 0. Then (a) (b) (c) (d) Log x > x always Log x < x always Log x is a fixed proportion of x None of the above
20.
Which Five-year Plan is currently going on in India? (a) (b) (c) 9th 10th 11th
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(d)
None of the above
PART-B
( This Part has 12 questions. Each question is of 5 marks. You are required to do any 9 out of 12 questions.) 21. Identify the erroneous steps in the problem below and provide explanations: Let A=2..(i) A2-4=0(ii) (A-2) (A+2)=0..(iii) A+2=0..(iv) A=-2.(v) 2=-2.(vi) 4=0..(vii)
22.
Let S (n) denote the sum of first n positive integers. Prove by the method of induction that S(n)=1/2n (n+1)
23.
A monopolist solves the profit maximizing problem given an inverse demand curve P=P(x), (P < 0) and a cost curve C(x), (C(x)>0 and C(x)>0) where x is quantity. Prove that it will always choose a price that will exceed MC whenever it produces a positive a positive level of output
24.
The following data are given for an economy: GDP at factor cost = 10,000
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Net current account balance = -500 Gross investment = 2000 Net factor incomes from abroad = -800 Depreciation = 1000 Net indirect taxes = 1300 Calculate: (a) (b) (c) (d) (e) GDP at market prices GNP at market prices Gross savings Net savings NNP at factor cost.
25.
In a closed economy consumption is given by C=1000+0.8 (Y-T) where Y denotes income and T the revenue from income tax. The income tax rate is uniformly 25% on all income. If investment in this economy rises by 500 and government expenditure by 100, starting from some initial situation, then (a) (b) (c) (d) (e) how much does income increase by; how much does consumption increase by; how much does the tax revenue increase by; how much does fiscal deficit increase by; how much do private savings increase by?
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26.
The following data for an economy are given: Merchandise exports = 500 Merchandise imports = 400 Exports of services = 150 Imports of services = 100 Income receipts on assets abroad = 100 Income payments of foreign assets = 150 Net unilateral transfers = -10 Change in assets abroad = 500 Change in foreign assets held in a country = 400 Calculate (a) (b) (c) (d) the merchandise trade balance; the balance on investment income; the balance on current account; the statistical discrepancy.
27.
Consider the following evidence on labour requirements per unit or output: Case 1 Case 2
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UB Beer Chips (a) (b) 28. 4 1
Mexico 1 2 Beer Chips
US 4 2
Mexico 2 1
In each case indicate, the commodity in which each country has absolute advantage/disadvantage. Indicate in each case, the commodity in which each country has comparative advantage.
A customers utility function is given as follows: U(x, y) = min (x, y) His total income is 100, price of x is 2 and price of y is 3. What is his optimum choice of commodity bundle?
29.
If the marginal propensity to consume in a closed economy is 0.6 and the government decides to increase its expenditure by 100 local currency units, how much would the equilibrium income of the country increase by and why?
30.
Prove that 0.999999 = 1
31.
A fair dice is being rolled. What is the probability that a six appears in at most n attempts?
32.
If x and y are two positive numbers, then prove that their geometric mean is equal to the geometric mean of their arithmetic and harmonic means.
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PART C (This Part has 4 questions. Each question is of 10 marks. You are required to do 2 out of 4 questions)
33.
I the multiplication problem A, B, C, D, E, F, G, J stand for distinct integer; O stands for zero. Find values and provide explanations: C D 9 F 4 G -------------------------J A 4 D 4 C 4 B A G F D A C J -------------------------B B 4 O 4 B 4 -------------------------A B
34.
A based dice is rolled independently three times with the probability of an even number appearing being twice that of an odd number. We define two random variable X1 and Y. X1=1, if the I the roll gives an odd number =0, otherwise Y = X1+X2+X3 (a) (b) Find the probability distribution of Xi. Find the probability distribution of Y.
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(c)
What are the mean and variance of Y?
35.
Explain why the largest exports of foodgrains (17 million tones) in Indias history of the entire past century took place in the period, July 02 November 03, although there was a severe drought and output was 15% lower than in the previous year.
36.
Four students A, B, C, D competed in mathematics, logic, literature and economics contests and each one of them won one contest. Below are given the forecasts made by these students: A: D will win the logic contest B: C will win the economics contest C: A will not win the mathematics contest D: B will win the literature contest. It turned out that the forecasts made by the winners of the literature and economics contests were wrong; and those made by the winners of the mathematics and logic contests were right. Who won which contest?
PART - D 37. Who an essay on any one of the following five topics: (a) (b) (c) Why are prices for comparable good lower in poorer countries? Discuss the relation between the Great Depression and Keynes theory. Hoe does the Government of India define the poverty line? Do you agree with it? Discuss.
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(d) (e)
Discuss the rationale of the strategy of import substituting industrialization in India during the 1950s and 1960s. Discuss the concept of exploitation in Marx.
ENTRANCE EXAMINATION, 2003 M.A. ECONOMICS PART A (This Part has 20 multiple-choice questions. Each question is of 1 mark. You are required to do all 20 questions) 1. Indifference curves are downward-sloping: (a) (b) (c) (d) because both goods are assumed to be desirable because of the assumption of diminishing marginal utility because of the assumption of diminishing marginal rate of substitution because of the assumption that prices are positive.
2.
If marginal cost is increasing then (a) (b) it is necessarily the case that average cost is increasing it is necessarily the case that average cost is decreasing
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(c) (d)
it is necessarily the case that average cost is constant None of the above.
3.
Between two periods in a closed economy everybodys propensity to save (a) (b) (c) (d) savings double income doubles savings remain unchanged income remains unchanged
4.
In an economy where capital and labour are the only factors of production, we have for a particular period. Capital Stock : 1000; Output-capital ratio : 0.4; Employment : 200. Wage rate : 1. The rate of profit in the economy is (a) (b) (c) (d) 3% 10% 20% There is not enough information to calculate the rate of profit.
5.
The random variable X has two properties : (i) the mean of X is 2, and (ii) the mean of X2 in 9. What is the variance of 4X? (a) 80
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(b) (c) (d)
20 144 112
6.
An urn contains 3 black balls and 2 red balls. You draw two balls without replacement from the urn. What is the probability that both drawn balls are red? (a) (b) (c) (d) 2/5 4/25 3/10 1/10
7.
A monopolist manufactures widgets. The quantity, q that the monopolist produces must be a non-negative integer. The total cost C(q) of producing q units is C(q) = 10q. The inverse demand curve for widgets is p(q) = 20/q, where p denotes the market price of widgets. What is the monopolists profit maximizing q? (a) (b) (c) (d) The problem does ot have a solution. 1 Infinity 0
8.
In a particular market, (p*,q*) is a monopolists profit maximizing price quantity choice. At (p*,q*), the absolute value of price elasticity of market demand is
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(a) (b) (c) (d)
zero one between zero and one greater than one
9.
In a rectangular array (matrix) of distinct positive numbers, which has m rows and n columns, let x denote the largest of the smallest number in each column [i.e., x = maximum of (xj | j (1, 2, ; and xj is the smallest number in column A] and y the smallest of the largest number in each row [i.e., y = minimum of y, ] i.e. 1, 2 ; m and y, is the largest number in row 1]. Then one can infer. (a) (b) (c) (d) x>y y>x x =y None of the above.
10.
Populations of two species A and B at time O are equal. If the instantaneous rates of growth of populations of species A and B are u and u + 1 respectively, u>0; then a time 1 the population of species B would be (a) (b) (c) (d) twice the population of species A log 10 times of the population of species A cu times the population of species A e times the population of species A
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11.
Suppose in both the closed economics A and B annual real income (Y) is equal to the sum of annual real consumption expenditure (C) and annual real government expenditure (G). Suppose in both A and B, C=100+0 SY and the government purchases 100 units of final goods and services per year. However, while in A the goods and services purchased, by the government are used to build roads and bridges, in B they are used for birthday celebrations of public servants. What are the equilibrium levels of Y in A and B? (a) (b) (c) (d) A : 400, B : 400 A : 200, B : 200 A : 400, B : 200 A : 200, B : 400
12.
Current account balance of payments deficit of an open economy is (a) (b) (c) (d) deficit of foreign trade + inflow of foreign direct investment imports of goods and services -0 exports of goods and services + depletion of foreign exchange reserve imports of goods and services exports of goods and services + external assistance and foreign commercial borrowing imports of goods and services exports of goods and services net remittances out of factor incomes received from abroad
13.
Gross domestic savings rate of the Indian economy is approximately (a) 23%
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(b) (c) (d)
30% 19% None of the above.
14.
The Society for Prevention of Cruelty to Cats and Dogs has 100 members of whom 60 members love dogs more than cats and 40 members love cats more than dogs. Three-fifth of dog-lovers and one-fifth of cat-lovers are male. Every year the society elects two members as its President and Vice-President. The post of President is reserved for a dog-lover while the post of Vice-President is reserved for a female catlover. How many different pairs of Presidents and Vice-Presidents can the society possibly have? (a) (b) (c) (d) 1200 1152 1920 None of the above.
15.
Give a set of five distinct real numbers, the ZONK of the set is defined to be the average of the maximum and the minimum numbers in the set. Given a set of ten distinct real numbers, the GRAND ZONK of the set is defined to be the maximum of the ZONKs of all possible subsets of five real numbers included in this set. What is the GRAND ZONK of the set consisting of the first ten positive, integers? (a) (b) (c) 7.5 5 2.5
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(d)
None of the above.
16.
Which one of the statements given below is correct for the year 2000-2001? (a) (b) (c) (d) The primary sector of the economy is approximately 50% of the GDP. The secondary sector of the economy is approximately 50% of the GDP. The tertiary sector of the economy is approximately 50% of the GDP. None of the above.
17.
In 1990-91, the price index of agricultural commodities was 200 and that of manufactured products 150. In a years time both the indices increased by 15 [i.e., the price index of agricultural commodities became 215 and that of manufactured products 165] Consequently, the terms of trade between agriculture and industry (a) (b) (c) (d) moved in favour of agriculture moved in favour of industry remained unchanged None of the above.
18.
Which of the following is a possible sequence of combinations for the salesman to visit in two successive years? (a) Year 1 : Pune, Bangalore, Chandigarh; Year 2 : Bangalore, Bhopal, Lucknow.
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(b) (c) (d)
Year 1 : Pune, Bangalore, Bhopal; Year 2 : Pune, Bangalore, Lucknow. Year 1 : Pune, Bhopal, Lucknow; Year 2 : Pune, Bangalore, Chandigarh Year 1 : Bangalore, Bhopal, Lucknow, Year 2 : Pune, Chandigarh, Bhopal.
19.
I, the salesman visits Pune, Bangalore and Chandigarh in the first year, which of the following combinations must be visited in the third year? (a) (b) (c) (d) Pune, Bangalore and Chandigarh Pune, Bangalore and Bhopal Pune, Chandigarh and Bhopal Chandigarh, Bhopal and Lucknow.
20.
If the salesman visit Pune, Lucknow and Bhopal in the first year, which of the following combination must be visited in the eleventh year? (a) (b) (c) (d) Pune, Lucknow and Bhopal Pune, Bangalore and Bhopal Pune, Chandigarh and Bhopal Chandigarh, Bhopal and Lucknow.
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PART B [This part has 12 questions. Each question is of 5 marks. You are required to do any 9 out of 12 questions] 21. The market for a particular good consists of 2000 buyers and 2000 sellers. (i) Each of 1000 buyers has the following demand function: Demand = = (ii) 0 if price (p) > 100 100 2p if 0 p 100
Each of 500 buyers has the following demand function: Demand = = 0 if p > 100 200 2p if 0 p 100
(iii)
Each of the remaining 500 buyers has the following demand function: Demand = = 0 if p > 100 400 4p of 0 p 100
(iv)
Each of the 2000 sellers has the following supply function: Supply = = (a) (b) 0 if p < 1 2p 2 if p 1
Find market demand and supply functions. Calculate the market equilibrium price and quantity.
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22.
The following table shows the average cost of producing n units of output (n u 1, 2, , 10) by a competitive firm: Output 1 2 3 4 5 6 7 8 9 10 Average Cost 11.00 6.50 5.33 5.00 5.00 5.17 5.43 5.75 6.11 6.50
It is also given that the total variable cost of producing B units of output is 36. (a) (b) (c) (d) What is the total cost of producing 5 units of output? What is the average variable cost of producing 4 units of output? What is the marginal cost of producing the 9 th unit of output. What is the profit maximizing output for the firm if the market price of the good is 6?
23.
The house numbers of three individuals A, B and C are (i) distinct from each other and (ii) lie between 1 and 99. Both these facts are known to all three individuals B asks A, when C is not present; two questions : (i) Is your house number a perfect square? (ii) Is your house number greater than 50? Assuming As answers to be correct, B is able to infer the house number of A from the answer to the two questions given by A. As house number, however, is not the same as inferred by B because A answered only the second question truthfully. C asks A, when B is not present, two questions: (i) Is your house number a perfect cube? (ii) Is your house number greater than 25? Assuming As answers to be correct, C is able to infer the house number of A from the answers to the two questions given by A. As house
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number, however, is not the same as inferred by C because A answered only the second question truthfully. Deduce the house numbers of the three individuals given that (i) As house number is less than the house numbers of both B and C and (ii) the sum of the house numbers of the three individuals is a perfect square multiplied by two.
24.
Suppose that in short-run equilibrium in an economy, Y=C+I where C=Y 1/2 and I = I* (Y : flow of real income, C : flow of real consumption expenditure. 1 : flow of planned real investment expenditure, I* : arbitrary positive amount of investment]. Show that the value of the investment multiplier in the economy is inversely related to the value of I*
25.
A price taking firm makes machine tools (Y) using labour (L) and capital (K) according to the production function: Y=L0.25 K0.25. Labour can be hired at the beginning of every week while capital can be hired only at the beginning of every month Wage rate = rental rate of capital = 10. Given the above information the short run (week) total variation cost of producing Y machine tools is 10Y 4 / K*, when the amount of capital is fixed at K*. In the long run (month) when both inputs can be varied, the total cost of producing Y machine tools is 20Y 2. (a) At the beginning of the month of January, the firm is making long-run decisions given that the price of machine tools is 400. What is the long-run profit maximizing number of machine tools? How many units of L and K should be the firm hire at the beginning of January? Suppose at the beginning of the third week of January, the price of machine tools increases to 691.20. What is the new short-run profit maximizing level of output? How many extra units of L will the firm hire for the rest of January?
(b)
26.
Petrol is sold in a competitive market. The market demand for petrol is given by : QD=100-2Pc where Pc is the price paid by consumers. The market supply curve is given by : QS=3Ps where Ps is the price received by suppliers.
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(a) (b)
If there are taxes on petrol, what will be the equilibrium price and quantity? Suppose the government imposes a unit tax of 1 per unit of petrol. In the new post-tax equilibrium, what price do the consumers pay, and what price do the suppliers receive? How many units of period are sold?
27.
A community of fishermen has access to a lake. The cost of sending a boat out to the lake is 1. Should b fishermen go out to catch fish (that is, there are b boats on the lake), the total fish caught is (b) 10b (so each boat catching (b) / b fish). The price at which a fish can be sold is 2. This price is unaffected by the level of the catch from the lake. (a) If a fisherman stays house, his net income is 0. If a fisherman takes a boat to the lake, his no income is : [market value of his catch] [cost of 1]. A fisherman takes the action [stay home the lake] that maximizes his net income. In equilibrium, how many boats will be on the lake?
(b)
28.
X and Y are independent random variables. Let Vx and Vy denote the variance of X and Y, respectively. Let the random variable Z be defined to be [aX + bY] where a and b are two positive real numbers. It is known that (i) Vy is strictly larger than 1 (ii) the variance of Z is 1, and (iii) the covariance between Y and Z is 1. In terms of Vx and Vy what are a and b?
29.
A and B own equal number of camels. Price of a camel is the same as the total number of camels owned by A and B. Price of a sheep is 10, and the price of a goat is greater than 2 and less than 10. Together A and B sell all the camels. The amount of money they obtain by selling the camels is just sufficient to buy an odd number of sheep and one goat. Determine the price of a goat.
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30.
Let and g be two functions defined for all real numbers, where (x)=1+x and g(x)=1-x.Compute the following: (a) (b) (c) (d) (e) (2) / g(2) [g(2)] g[(2)] (t)g(-t) (-t)g(t)
31.
Calculate the sum: 12 + 22 + + n 2
32.
Prove: If x and y are real numbers, then |x + y | s | x | + |y|
PART C (This Part has 3 questions. Each question is of 10 marks. You are required to do 2 out of 3 questions.)
33.
Below are given 4 sets of 4 statements each. The number of true statements in any set is different from the number of true statements in any other set. A crime has been committed by one of the four individuals X, Y, Z and W. Determine which one of them is guilty.
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Set A: (a) (b) (c) (d) Set B: (a) (b) (c) (d) Set C: (a) (b) (c) (d) Set D: (a) (b) There is a real number such that |x+5| = |x+6|. There is no real number x such that x4 + 2x2 + 1 = 0. Square root of 11 is an irrational number. If a is a positive rational number and b is a negative irrational number then ab is an irrational number. If a < b then 1 / a > 1 / b Z has committed the crime. If a and b are complex numbers and neither of them is a real number then a+b is also a non-real complex number. If a, b, c are real numbers and a>b then a-c>b-c. If a and b are real numbers then a / b is a real number. Y has committed the crime. If a is a real number then a2 a. If two events are mutually exclusive then they are independent. If both real numbers a and b are non-integers then a+b is also a non-integer real number. X has committed the crime.
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(c) (d)
Every positive real number has two distinct real square roots. W has committed the crime.
34.
For a race, five individuals made forecasts. Each of them made two statements, at least one of which turned out to be false. Determine who won which medal. Statements by individual 1 : A will not win the gold medal. B will not win the silver medal. Statements by individual 2 : C will win a medal D will not win a medal. Statements by individual 3 : D will win a medal. E will win a medal. Statements by individual 4 : D will not win the silver medal. E will not win the bronze medal. Statements by individual 5 : A will win a medal. C will not win a medal.
35.
During the lunch hour at a school, a chocolate bar was stolen by one of the five boys A, B, C, D, or E. Three of the boys always speak truthfully, and two of them always untruthfully. The statements made by the five boys are given below. Find out which of the boys stole the chocolate bar. A: B: C: D: E: Neither E nor 1 stole the chocolate bar. It was A or C who stole it. Both A and B are lying. Cs statement is not true; one of A and B is lying and the other is speaking the truth. What D said is wrong.
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PART D 36. Write an essay on any one of the following five topics: (a) (b) (c) (d) (e) The idea of Sustainable Development. The Public Distribution System in India. Causes of Unemployment in India. The Impact of Trade in Agriculture on Indian Agriculture. Parliamentary Democracy.
PART A 1. An Interior good is a good for which (a) (b) (c) (d) Demand necessarily rises as price rises, other things remaining the same. Demand necessarily falls as price rises, other things remaining the same. Demand necessarily rises as income rises, other things remaining the same. Demand necessarily falls as Income rises, other things remaining the same. 1
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2.
An individual ranks any two bundles (x, y) and (x y) in the following manner; if either x > x or if x = x and y > y, the individual prefers (x, y) to (x, y). Given that the individual has an Income of Rs. 100 per week and the price of good x is Rs. 2 per unit while the price of good y is Re 1 per unit, the individual will purchase every week. (a) (b) (c) (d) 25 units of good x and 50 units of good y. 100 units of good y. 50 units of good x. 45 units of good x and 10 units of good y. 1
3.
Payasia is a closed economy in which only three commodities are produced; milk, rice and payasam (made out of milk and rice). In the year 2001, Rs.1,000 worth of rice, Rs. 600 worth of milk and Rs. 800 worth of payasam were produced; Rs. 200 worth of rice and Rs. 300 worth of milk were used up to produce the payasam that year. Assuming that Payasia had no stocks of rice and milk at the beginning of the year 2001, the GNP in Payasia in 2001 was (a) (b) (c) (d) Rs. 2,400 Rs. 1,900 Rs. 1,600 Rs. 2,100 1
4.
In a closed economy, the marginal propensity to consume halves but the level of investment remains the same. Assuming all other things do not change, at the new equilibrium, in comparison to the earlier one.
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(a) (b) (c) (d)
Savings doubles. Income halves. Savings is unchanged. We cannot necessarily claim any of the above. 1
5.
Suppose that GNP at current prices in a country in the year 2002 was Rs. 250; the implicit GNP deflator (base 1990 = 100) for the year 2002 in this country was 125. Than the GNP for this country at constant 1990 prices was (a) (b) (c) (d) Rs. 125 Rs. 50 Rs. 200 Rs. 175. 1
6.
In 2000-01, per capita GDP of India, in current prices was about (a) (b) (c) (d) Rs. 2,000 Rs. 10,000 Rs. 20,000 Rs. 30,000. 1
7.
The probability of drawing an ace from a well shuttled pack of cards
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(a) (b) (c) (d)
1/28 1/52 1/13 4/13 1
8.
If A and B are mutually exclusive events then (a) (b) (c) (d) A and B are independent events P(A) + P(B) = 1 P(A) + P(B) A . B = the null set. 1
9.
If , are real numbers such that for any c>0, < + c then (a) (b) (c) (d) < necessarily > necessarily = necessarily necessarily. 1
10.
The function y = ax, where a is a positive number, has a derivative at x=2 which is given by (a) a2log0a
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(b) (c) (d)
2a a2log10a None of the above. 1
11.
A class of 50 students wrote a class test of 25 marks. The cumulative distribution of marks was as shown along side, if you pick-up a student at random from the class, then the probability that the student will score more than 20 is (a) (b) (c) (d) 0.2 0.1 0.5 0.25
Class of Marks 0 to 5 5 to 10 10 to 15 15 to 20 20 to 25
Cumulative Frequency 2 10 20 40 50
12.
A the group of persons, the mean age is 12, and the median is 10. The probability that a randomly selected person from the group will be 12 years or older is (a) (b) (c) (d) Equal to 0.5 Less than 0.5 Less than or equal to 0.5 Greater than 0.5
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13.
There are two villages A and B. An equal number of households, say 200, live in each village. Total agricultural land in each village is 200 hectares. The median land holding is 0.5 hectares in village A and 1 hectare in village B. What can we say about the inequality of land distribution in A and B? (a) (b) (c) (d) Inequality is more in A than in B Inequality is less in A than in B Level of inequality is same in A and in B Any of the above could be true.
14.
Integrated Rural Development Programme was a (a) (b) (c) (d) Programme for infrastructure wage employment generation and creation of rural
Credit-subsidy programme for generation of self-employment. Programme for electrification. All of the above. building rods, minor irrigation projects and rural
15.
Human development Index is an Index based on (a) (b) (c) (d) Per capita income, educational attainment and life expectancy Poverty, inequality, educational attainment and life expectancy Per capita income, poverty, sex ratio and inequality Per capita income, sex ratio, inequality and educational attainment.
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1 16. Official estimates of poverty in India are based on the data on (a) (b) (c) (d) Consumer expenditure of households Incomes of households Assets of households All of the above. 1
17.
If x, y are two real numbers and it is known that their product is zero, then (a) (b) (c) (d) If y is zero, then x is necessarily zero. If y is zero, then x is necessarily not equal to zero. If y is not zero, then x is necessarily zero. None of the above is necessarily true. 1
18.
If demand facing a monopolist is measured in kilograms (kgs) and the price is measured in Rs. per kg, the deadweight loss due to the monopolist charging a profit maximizing price is measured. (a) (b) (c) (d) In Rs. In kgs In Rs. per kg As a pure number. 1
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19.
If the demand curve is given by 0 = 100 P where O is measured in metric tons and P in Rs. per metric ton, the price elasticity of demand when P = Rs. 10 per ton is (a) (b) (c) (d) Rs. 9 per metric ton Re (1/9) per metric ton 1/9 metric ton 1/9 1
20.
If the marginal propensity to consume goes up then, all other things remaining the same, the value of the Keynesian multiplier will (a) (b) (c) (d) Remain the same Increase Decrease Change in an unpredictable manner. 1
PART B Answer all questions in the space provided 21. A monopolist faces two distinct and separate markets; in one market, the demand curve is given by O1 = 10/p, in the other market, the demand curve is given by O 2 = 1000 p2, O1, p1 and O2, p2 denote quantity and price respectively in the two markets. The monopolist can produce any amount of output of a constant marginal cost of 20 per unit. How much does the monopolist sell in each market and at what price? 5
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22.
Use the derivative of the function y = xi to obtain an approximate value for 16.02. 5
23.
The following are the complete set of Items which are found in the national accounts statistics of Hibbyjibby for the year 2000-01. (i) (ii) (iii) (iv) (v) (vi) (vii) (viii) (ix) Depreciation Allowances = Rs. 200. Personal (direct) Tax Payments = Rs. 250. Indirect Business Taxes = Rs. 200. Corporate (Profits) Taxes = 100. Dividend Payments = Rs. 50. Undistributed Profits = Rs. 50. Government Transfer Payments = Rs. 200. Personal Consumption Expenditures = Rs. 1,200. Personal Savings = Rs. 100.
Use the above entries to compute (a) (b) (c) (d) Personal Income. Net National Product. National Income. Gross National Product.
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For Hibbyjibby for the year 2000-01.
24.
The consumption function is specified to be C=100+0.8Y d where Yd is disposable income; the following is also given: Investment=50; Government Purchase=200; Transfer payments by government = 62.5 and there is a uniform rate of taxes on income given by 0.25. (i) (ii) (iii) Equilibrium level of income. Value of the multiplier. The budget surplus. 5
25.
In a group of 5 persons, there are at least two men and two women. In how many different ways can they be seated on the same side of a straight table so that no two persons of the same sex sit side by side? How many ways are there of such a seating arrangement if the table is circular? 5
26.
Random variables X and Y have the same mean u; their respective variance are given by a2 where j=X, Y. Consider Z = a, X + b.Y where a, b > 0; It is known that Z too has the same mean u. (i) (ii) What restrictions must a, b satisfy for the above to be true? Given that Z has the mean u. and that X and Y are independent random variables, what choice of z, b would minimize the variance of Z? 5
27.
An individual, who spends his entire income in purchasing two goods, Is seen to purchase the following bundles of two goods in three situations:
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Bundle A : Bundle B : Bundle C :
(100,10), when prices of the two goods are (1,10) respectively; (50, 15), when prices of the two goods are (5, 1) respectively; (40, 20), when prices of the two goods are (4, 4) respectively.
Is it possible to infer the persons preferences over the bundles A, B and C? Explain your answer carefully. (The bundle (x, y) refers to x units of the first good and y units of the second good; the prices (p, a) refers to price of the first good being p per unit and that of the second being q per unit. 5
28.
It is observed that persons shooting at the target in a firing range hit the bulls eye with probability . Among the following, events which would you expect to be more likely: Even E : One person hits the bulls eye at least once in four tries. Or Event F : Two persons, simultaneously firing at separate targets, hit the bulls eye at the same time, at lest once in 10 tries. For your answer uses any of the following information which you find necessary: 37/64=0.58; 81/256=0.32; 1/16=.06 (0.94)10 = 0.524; (0.94)20 = 0.275. 5 PART C Answer all questions in the space provided
29.
In the following multiplication problem the letters a, 5, c, d, e, g, l and k stand for district integers; 0 indicates a zero; 6 of course is six, Find out what the other integers are:
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b 0
c 6 c d
d g k
k g g 6 a j d g j
6 o 0 6
k 10
30.
In country A it takes 100 labourers to produce 1 unit of good X while it takes only 40 labourers to make 1 unit of good X in Country B; In Country A it takes 100 labourers to produce 1 unit of good Y while it takes 80 labourers to produce 1 unit of good Y in Country B. Each country has 56,000 labourers. (i) (ii) What is the production possibility locus in each country? Assume that there is no trade between country A and B but that in both countries, both X and Y are produced. What must be relative price of good X in each country? With free trade between A and B, what is the range in which the post-trade relative price of X is expected to be? How does this trade benefit both countries? 10
(iii) (iv)
31.
Read the following passage from The Wealth of Nations by Adam Smith and answer the questions at the end of the passage: What are the common wages of Labour, depends everywhere upon the contract usually made between those two parties, whose interests are by no means the same. The workmen desire to get as much, the masters to give as little as
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possible. The former are disposed to combine in order to raise, the latter, in order to raise, the latter, in order to lower the wages of labour . The masters being fewer in number, can combine much more easily; and the law, beside, authorizes, or does not prohibit their combinations, while it prohibits those of the workmen .. in all such disputes the masters can hold out much longer. 32. A landlord, a farmer, a master, manufacturer or merchant, though they did not employ a single workmen, could generally live a year or two upon the stocks which they have already acquired. Many workman could not subsist a week, few could subsist a month and scarce any a year without employment. In the long run the workman may be as necessary to his master as his master is to him; but the necessity is not so immediate. (i) (ii) List three reasons which Adam Smith mentions to support his claim that masters have an advantage over workman. Among the ones you have chosen, which would you consider to be valid even to-day and why? 6
PART D Answer any one question within 250 words. Violations of word limit will be penalized. 33. (a) What is meant by the term Poverty Ratio? What is the likely range of the estimate of this poverty indicator for India? List any three poverty alleviation programmes which have been undertaken by the government of India. Write an appraisal of any of them. OR (b) What period did the Second Five Year Plan cover? What was its major thrust? Did this thrust change in the later plans? Do you think planning in India has failed? OR
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(c)
What is the Green Revolution? Which States of India led the revolution and in which crops? Has this revolution led to a sustainable growth in Indian Agriculture? 12
M.A. ENTRANCE EXAMINATION, 2001 ECONOMICS
PART I 1. Two events A and B are equally likely and are independent. The probability of the events occurring simultaneously is 0.36. The probability of event A. (a) (b) (c) (d) is 0.9 is 0.6 is 0.4 cannot be computed on the basis of the information given. 1
2.
An individuals indifference curves between goods X and Y are downward -sloping because (a) (b) the marginal rate of substitution between X and Y is diminishing the marginal rate of substitution between X and Y is increasing
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(c) (d)
more of any good X or Y is always better the utility function is concave. 1
3.
The term Fiscal Deficit refers to (a) (b) (c) (d) the amount of government expenditure that has to be financed by disinvestment the excess of total government expenditure over government revenue the amount of government expenditure financed by borrowing from the Reserve Bank of India the amount of government expenditure financed by borrowing from the banking system. 1
4.
The share of the urban population in India is approximately. (a) (b) (c) (d) 20 per cent 30 per cent 40 per cent 50 percent.
5.
Net National Product refers to (a) (b) Net Domestic Product plus Net Factor incomes from Abroad. Net Domestic Product plus Net workers Remittances from Abroad.
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(c) (d)
Net Domestic Product plus Net Foreign Aid from Abroad. Net Domestic Product minus Net Dividend Payments Transferred Abroad. 1
6.
An asset which lasts forever is expected to give a return of Rs.600 each year. If the rate of interest is 12 per cent, the present value of the asset is (a) (b) (c) (d) Rs. 7,200 Rs. 12,000 Rs. 5,000 Rs. 2,000 1
7.
A person takes Rs. 100 of currency notes and puts them into a demand deposit in a bank. The bank keeps Rs.10 of this amount and lends out Rs.90. As a result of these transactions, money supply in the economy. (a) (b) (c) (d) has reduced by Rs.10 has remained unchanged has increased by Rs.90 has increased by Rs.190. 1
8.
A country with a capital stock of Rs.30,000 crores produces an output of Rs.10,000 crores annually. Its capital output ratio is (a) 3
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(b) (c) (d)
1/3 3 per year 3 years. 1
9.
During the great Depression of the 1930s, the net barter terms of trade (a) (b) (c) (d) moved in favour of industry and against agriculture moved in favour of agriculture and against industry remained unchanged between agriculture and industry could not be calculated between agriculture and industry. 1
10.
The Finance Commission is statutory body constituted periodically to (a) (b) (c) (d) suggest financial sector reform policies determine the investment policies of term-lending financial institutions like the IDBI and IFCI audit the finances of the Central Government determine the distribution of Central tax reserves between the Centre and the States.1
11.
The 73rd Constitutional Amendment relates to (a) Centre-State Finances
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(b) (c) (d)
The preservation of historical and religious monuments Panchayati Raj Institutions. The delineation of Lok Sabha Constitutions. 1
12.
In order to make the Indian patent laws TRIPS compatible (a) (b) (c) (d) product patents currently in force have to be removed. process patents currently in force have to be removed. product patents not currently in force have to be introduced. process patents not currently in force have to be introduced. 1
13.
John Maynard Keynes main contribution to economics was to show that (a) (b) (c) (d) a socialist economy is intrinsically unworkable an open economy is always superior to a closed one a capital at economy can be afflicted by a problem of demand deficiency controlling the deficit on the governments budget is the principal economic problem of our time. 1
14.
A terminator gene, if introduced into a plant (a) (b) kills the plant itself over a period of time kills weeds
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(c) (d)
kills insect pests prevents the production of seeds that can reproduce the plant. 1
15.
Over the decade of the 1990s per capita food grain availability in India has (a) (b) (c) (d) increased by 50 per cent increased by 30 per cent increased by 10 per cent not increased.
16.
Z is a random variable with mean equal to 2 and variance equal to 2. The variance of the random variable 2Z equals (a) (b) (c) (d) 4 0 8 16 1
17.
The demand curve facing a firm is as follows: q(p) = Ap-4. The demand curve is elastic if not only if (a) (b) A>1 A < 1 and > 0
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(c) (d)
>1 <1 1
18.
If (x) = x3 x2 9x + 9 and (x) intersects the X-axis at x = 1, then it also intersects the X-axis at (a) (b) (c) (d) two more points x = + 9 and x = - 3 three more points x = + 3; x = - 3; and x = + 9 two more points x = +3 and x = - 3 one more points x = +9. 1
19.
The exchange rate between two currencies is said to reflect purchasing power parity when (a) (b) (c) (d) trade is balanced between the two economies there is zero net capital movement from one economy to the other when a bundle of commodities costs the same in the two economies at that exchange rate when the rates of inflation in the two economies are identical. 1
20.
The free rider problem refers to (a) (b) Ticketless travel in the Indian Railways The economics of horse racing and the breeding of horses
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(c) (d)
The tendency to evade taxes Preference non-revelation in the case of goods where consumption is joint. 1
PART II Answer any five questions in the space provided. 1. The following information is given: Index of Wholesale Price (1990 = 100) Weight Good A Good B Good C All three goods 25 ? ? 100 1997 150 125 140 135
The weights represent the shares of base year (1990) sales of each commodity in total sales. What is the proportion of good C sales in the total sales in 1990? 8
2.
Let (x) = x x3 and 1 x 0. What are the values of x that maximize (x)? 8
3.
Find the optimal consumption bundle for the following utility function, prices and income.
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u(x, y) = max (x, y) px = py = 1 Total Income = 2. 8
4.
When the market prices are Rs. 5 per apple and Rs. 6 per orange, a person buys 16 apples and 28 oranges. When the prices are Rs.4.4 per apple and Rs.6.4 per orange, the person buys 20 apples and 25 oranges. Assuming that utility is derived only from apples and oranges, in which situation is the person better of? 8
5.
Out of every rupee of income that accrues to the non-government sector of an economy, 15 paise come back to the government as income tax, 25 paise are saved, and 10 paise are spent on imported goods. Starting from some initial level of income in this economy, and assuming that the government has no revenue other than this taxation, if government expenditure rises by Rs.100 crores, with exports and private investment remaining unchanged, what would be the increase in total domestic income? 8
6.
The total cropped area in a country is used partly for producing foodgrains and partly for producing non-foodgrains. Between two periods, the total cropped area increased by 20 per cent while the area under non-foodgrains increased by 50 per cent to account for 3/8 of total cropped area in the second period. How much was the change in the area under foodgrains between the two periods? 8
7.
Let C denote consumption in an economy, Y income, D disposable income, T taxation, 1 investment, and G government expenditure. The following relations hold:
C = 15 + .7 D
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T = -30 + .2 Y D = .8 Y + 30 Given that 1 = 50 and G = 24, calculate the national income assuming there is no depreciation. Assume that capital stock at the start of the period is 1200 units and that each unit of capital stock produces units of output per period. What is the potential output of the economy? How does it stand in relation to the national income? 8
8.
A person wants to sell his labour and spend his income entirely on the consumption of good G. The person enjoys, leisure hours (L) and his utility from consuming G and L is given by u = G1/2 L
There is a maximum of 10 hours each day that the person can allocate between leisure and work. Compute the supply of labour of this person.
PART III Answer any two questions. The answer must not exceed 800 words. Any answer exceeding this length will be penalized. 20 + 20 1. 2. 3. What according to you explains the fact that the foodgrain stocks in the country today are at a record level of close to 45 tones? A Pareto-Optimal state may be perfectly disgusting. Comment. Discuss the view that the opposition to big dams is based on ignoring rational economic calculations.
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4. 5. 6. 7. 8. 9.
A combination of scholarship/loans and fees which cover full costs is better than a subsidized educational system. Do you agree? A reduction in fiscal deficit is necessary for high growth. Do you agree? The demand to redistribute land to the tiller is not more of relevance in India. Do you agree? Full employment is incompatible with the functioning of a capitalist economy. Discuss. Why is the log-normal distribution the preferred distribution function for personal incomes? What is meant by the form crowding out of private investment? Discuss whether it has played any role in Indias economic development.
PART I 1. Consider a society of two individuals in which a single commodity is produced, individual 1 getting x units and individual 2 y units of the commodity. Suppose only three outcomes are possible in any time period. A : x = 10, y; B: x = 7, y = 5; C : x = 5, y = 12.
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Then (a) (b) (c) (d) society will prefer B over C society will prefer C over B society will be indifferent between B and C we cannot say which of (a), (b), (c) will hold. 1
2.
19 identical and unbiased dice are thrown independently under identical conditions. What is the expected value of the number of dice on which an odd number appears? (a) (b) (c) (d) 9.0 9.5 10 None of the above. 1
3.
In a period of hyperinflation, which amongst the following would you generally expect to be the best store of value? (a) (b) (c) (d) Cash Bonds Gold Time deposits in banks. 1
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4.
The nature of long run equilibrium for a monopolistically competitive firm differs from that of a perfectly competitive firm because of (a) (b) (c) (d) the presence of supernormal profits the presence of excess capacity the equality between firm marginal revenue and marginal cost None of the above. 1
5.
In the IS-LM model of income determination, if the economy is not in a liquidity to an increase in government spending, in equilibrium (a) (b) (c) (d) reduces private investment spending increases private investment spending has no effect on private investment spending has no effect on private consumption expenditure.
6.
Suppose A and B are two independent random events. Suppose that P(A) = and P(B) = 0.28. What is the value of P(B/A)? (a) (b) (c) (d) 0.40 0.35 0.28 0.42
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7.
If a > b, then (a) (b) (c) (d) a/b > 1 always a/b < 1 always a/b = 1 always None of the above.
8.
Not clear matter.
9.
A utility maximizing choice of a consumers equilibrium occurs necessarily (a) (b) (c) (d) when the marginal rate of substitution equals the price ratio where the marginal rate of substitution equals the price ratio and all income is spent where the marginal rate of substitution equals the price ratio, all income is spent and all goods are consumed in positive quantities where none of the above is necessarily true. 1
10.
A monopolist faces a demand curve with unit price elasticity of demand. For such a monopolist, if marginal costs are positive (a) (b) profit maximizing output does not exist profit maximizing output is where marginal revenue equals marginal cost and marginal revenue is decreasing
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(c) (d)
profit maximizing output is where average revenue equals marginal revenue and average revenue is decreasing. None of the above. 1
11.
Suppose in a toss of an unbiased coin, the first 18 tosses have been head. Then the probability of a tail in the 19th throw is: (a) (b) (c) (d) more than more than but no more than 18/19 None of the above. 1
12.
It is known that in an examination, 5 percent of the examinees cheat. However, whenever an examinee cheats, a black dot appears on his or her answer script. An examiner receives an answer script with a black dot. What is the probability that the answer script come from a cheater? (a) (b) (c) (d) 0.05 1.00 there is insufficient information to answer the question None of the above. 1
13.
Consider a policy consisting of N individuals. A proportion, p of the individuals are rich, the rest are proof. Each of the N individuals die, leaving behind a child. Income mobility in this policy satisfies two rules:
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(i) (ii)
If the parent is rich, the child turns out to be rich with probability a. If the parent is poor, the child turns out to be poor with probability b. The proportion of children who are rich is: (a) (b) (c) (d) ap a + (1 b) p(a + 1 b) pa + (1 p) (1 b) 1
14.
A lumpsum tax is imposed on a monopolist, would his output: (a) (b) (c) (d) increase decrease remain unchanged cannot be said from this information 1
15.
The occurrence of an event A implies the occurrence of an event B. Which of the following is true? (a) (b) (c) (d) A is a necessary condition for B but B is not a sufficient condition for A A is a necessary condition for B and B is a sufficient condition for A A is a sufficient condition for B and B is not a necessary condition for A A is a sufficient condition for B and B is a necessary condition for A. 1
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16.
Suppose a perfectly competitive firm has a production function Q = AK0.4 L0.6; there A > 0, Q is the amount of output produced, and K and L are the amounts of capital and labour employed respectively, during a unit time period. What is the equilibrium ratio of wage bill to total revenue for the3 firm? (a) (b) (c) (d) 0.6 0.4 0.67 approximately Cannot be determined based on this information alone. 1
17.
Suppose the critical region for a test statistics S in a given test of significance is given by S1 S S2. Suppose that the probability (S < S1) = 0.03 and probability (S > S2 = 0.45. What is the level of significance being used in carrying out this test? (a) (b) (c) (d) 0.03 0.48 0.52 0.42 1
18.
Suppose that a consumer derives utility equal to 3x 1 + 5x2 on consuming x1 units of commodity 1 (priced at Rs. 9 per unit) and x 2 units of commodity 2 (priced at Rs. 16 per unit). At the optimum choice, which of the following is true? (a) (b) X 1 = x2 X 1 > x2
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(c) (d)
X 1 < x2 None of the above. 1
19.
All other things remaining constant, a rise in the exchange rate of the rupee against the dollar implies: (a) (b) (c) (d) a depreciation of the rupee against the dollar a depreciation of the dollar against the rupee both of the above None of the above. 1
20.
According to the 1991 census of the population, which state in India has the highest rate of literacy (age 7+)? (a) (b) (c) (d) Gujarat Kerala Punjab West Bengal. 1
PART - B 21. An individuals preferences over two goods are given by u(x, y) = max (x, y) (where max (a, b) = a if a > b.
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What do the indifference curves look like? Are there any circumstances under which the consumer buys both goods? 5
22.
A monopolist is able to produce any amount of output at a constant cost of 40 per unit of output. There are two separated markets here the monopolist can sell output, in one market the demand curve is Q1 = 10 P1, while in the other market the demand curve is Q2 = 100 P+2+. How much does the monopolist sell in each market? 5
23.
The sum of two unequal numbers is x and their product is y. Show that (1) x 2 2y and (2) the larger number is equal to x/2 + x2 4y. 5
24.
Show that in x < x for all x > 0.
25.
Consider an economy with a single commodity. Suppose that an individual lives for two periods, consuming c1 units of the commodity in period 1 and c 2 units in period 2. Suppose he earns y units of the commodity in each of the two periods. The individual can invest his savings from period 1 at a real interest rate of r. He can also borrow at the same interest rate against his future earnings. Finally, assume that the individuals utility function is:.. in c2, where q > 0. What is the individuals savings in period 1? 5
26.
Not readable matter.
27.
Ms. A spots a painting. She values the painting at Rs.100. In other words, she is willing to pay upto Rs.100 to own the painting. Ms. A first declares how much she is willing to pay for the painting. This declaration, denoted by Rs. b, need not equal her true valuation (Rs. 100). Upon hearing Ms. As chosen b -value, she is labeled as a
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winner with a probability equal to Min (b/100, 1). In this event, Ms. A gets the painting and pays Rs. b. Her net surplus is Rs. (100 b). On the other hand, if Ms. A is not labeled as a winner, she does not get the painting and she pays nothing. Her net surplus is Rs. 0. In order to maximize her expected net surplus, what b-value should Ms. A announce? 5 28. The number of minutes that a flight from Delhi to Bombay is carry or rate is a random, variable whose probability density function is given by: space for figure Where negative values are indicative of the lights being early and positive values are indicative of its being late. Find the probability that one of these flights will be at least two minutes early? 5
29.
Suppose that in Maghalaya, the probability that a rainy day is followed by a rainy day is 0.80 and the probability that a sunny day is followed by a rainy day is 0.60. Find the probability that a rainy day is followed by 1 rainy day, a sunny day and another rainy day. 5 A host decided to serve only one beverage . (a) (b) (c) beer and wine wine and milk beer and milk
30.
PART C 31. Consider a demand constrained economy with no foreign trade and no government sector. Suppose the consumption function is C = 10,000 + 0.75 Y and the
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investment function is 1 = 5,000, where Y denotes the size of total personal disposable income: (a) (b) (c) (d) (e) What is the equilibrium level of income? If, for some reason, the output level were 63,000, what would be the involuntary change in inventory? If investment increases to 10,000, what would be the effect on equilibrium income? What is the level of saving in this new equilibrium situation? Suppose consumption behavior were to change such that C = 10,000 + 0.8 Y while investment remains at the higher level of 10,000, what is the equilibrium level of income and the size of the multiplier in this changed situation? 10
32. 33.
The utility function of a consumer is given by u(x, y) = xy, the price of .. There are two firms in the economy producing X and Y, respectively. The activities .. firm X, besides affecting its own profits, also affect the profits of firm Y. This is known in the following table: X 0 1 2 3 4 Cost of X 0 2 4.5 7 10 Revenue of X 0 13 20 26 31 Profit of Y 60 54 47 38 30
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5 (a) (b) (c)
14
34
28
Suppose firm X does not have to compensate firm Y for its loss, what output (Xvalue) choice will maximize the profits of firm X? Suppose now that firm X has to compensate firm Y for its losses, what will be the new profit maximizing choice of firm X? Suppose firm X and firm Y merge to become a new firm Z, what choice of X will be optimal (profit maximizing) for this new firm Z? 10
PART A 1. Indifference curves are downward sloping: (a) (b) (c) (d) because both goods are assumed to be desirable because of the assumption of diminishing, marginal utility because of the assumption of diminishing marginal rate of substitution because of the assumption that prices are positive 1
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2.
If marginal cost is increasing then: (a) (b) (c) (d) It is necessarily the case that average cost is increasing. It is necessarily the case that average cost is decreasing. It is necessarily the case that average cost is constant. None of the above. 1
3.
If the absolute value of price elasticity of demand for a particular good is greater than one, then a rise in the price of the good implies that the total expenditure on the good would (a) (b) (c) (d) increase decrease remain the same nothing can be inferred as more information is required. 1
4.
Between year 1 and year 2, while production in all other sectors remained unchanged, government employees obtained a 10 per cent salary increase. As a consequence between the two years: (a) (b) (c) National income fell National income remained unchanged National income increased
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(d)
We cannot say anything about the movement in .
5.
Let x1 < x2 < x3 < x4 < x5. Suppose the arithmetic mean of x1, x2, x3, x4, x5, to M and arithmetic mean of x1 x2 x3 x4 is m. Then: (a) (b) (c) (d) A and B are mutually exclusive event. PW. P(B) = P(AB) A U B = the universal set P(A) = P(B). 1
6.
If A and B are independent events then: (a) (b) (c) (d) A and B are mutually exclusive events. P(A), M(B) = P(AB). A.B = the universal set. P(A) = P(B). 1
7.
Not readable. (a) (b) (c) (d) rises by 10% rises by 20% rises by 21% changes to an extent that available information cannot reveal. 1
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8.
During the years of the Great Depreciation in India, the inter-sectoral terms of trade (a) (b) (c) (d) moved against agriculture and in favour of industry moved in favour of agriculture and against industry remained unchanged are a subject on which no information exists 1
9.
Between two periods in a closed economy everybody propensity to save doubles while investment remains unchanged. As a result (a) (b) (c) (d) Savings double Income doubles Savings remain unchanged Income remains unchanged 1
10.
The first railway line in India was between: (a) (b) (c) (d) Howrah and Serampore Bombay and Thane Madras and Trivellore Delhi and Bhiwandi. 1
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11.
The production function Y = aK + bl, where Y = output, K = capital, L = labour and a and b are positive constants exhibits: (a) (b) (c) (d) Constant returns to scale Increasing returns to scale Diminishing returns to scale Cannot say what returns to scale it exhibits. 1
12.
The Communist Manifesto was written by: (a) (b) (c) (d) Kari Marx Kari Marx and Friedrich Engels V. I. Lenin Kari Marx and Friedrich Engels and V.I. Lenin 1
13.
A ball of which of the following colours could be in box B? (a) (b) (c) (d) Blue White Red Yellow. 1
14.
Which of the following is necessarily true?
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(a) (b) (c) (d)
The brown ball is in a lower numbered box than the yellow ball. The black ball is in a lower numbered box than the brown ball. The white ball is in a lower numbered box than the brown ball. The white ball is in a lower numbered box than the red ball. 1
15.
If the black ball is in a box2, balls of which of the following colours must be in boxes with consecutive numbers? (a) (b) (c) (d) Brown and Blue Brown and White Black and Yellow White and Red. 1
16.
If the black ball is in a box1, balls of which of the following colours must be in boxes with consecutive numbers? (a) (b) (c) (d) Brown and Black Brown and Yellow White and Red White and Yellow 1
17.
Log10, xn
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(a) (b) (c) (d)
log, x / log 10 log 10 / log x log, x / log10, e log10 e / log, x 1
18.
Derivative of log10 xn (a) (b) (c) (d) 1/x 1/x log, 10 Log, 10 / x 1/x log10 e 1
19.
An economy is characterised by the following consumption function: C = 1000 + 0.6Y Where Y is income in the economy and C is consumption. Income is equal to consumption plus investment. If investment is equal to 15,000, then income is equal to: (a) (b) (c) (d) 20,000 40,000 25,000 90,000 1
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20.
A persons income increased by 70% over a 2 years period. During this period the consumer price index increased by 50% in the first year and 20% in the second year. This persons real income at the end of two years compar ed to the beginning: (a) (b) (c) (d) was 10% lower was unchanged was 5.56% lower None of the above. 1
PART B 21. Calculate A correct upto 4 decimal places where A= .00729 x 2.425 .000025 x 3.33 2
22.
Suppose Rs. 1000 are deposited in a bank for four years at 10% per year, compounded annually. How much money would there be at the end of 4 years? 2 Under the assumption that the market rate of interest is 10%, calculate the present discounted value of the following stream of returns: 2 At the end of year one: At the end of year two: At the end of year three: Rs. 2,000 Rs. 4,000 Rs. 5,000
23.
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24.
Suppose the price elastically of demand of good X is 0.2. If the price of X rises by 2.8%, what effect on quantity demanded will this have? What effect does it have on the total expenditure on good X? A consumers demand function for a good is given by: Demand = 100 10p, where p denotes the markets price of the good. What is the price elasticity of demand when market price is 3 and the consumer is buying 10 units of the commodity? 2
25.
26.
In an economy where capital and labouor are the only factors of production, we have for a particular period: Capital stock: Output capital ratio: Employment: Wage rate: Calculate the rate of profit. 10000 4 300 10 per unit labour 2
27.
An economy employs land and labour in a fixed ratio. 1 acre of land with 16 workers to produce 1 unit of corn. It has 100 acres of land and 2100 workers. (i) (ii) What is the maximum output it can produce? What would be the extent of resource unemployment at this output? 2
28.
When the price of an orange is Rs. 4 and of an apple to Rs. 5, an individual buys 6 oranges and 4 apples. When the prices are 5 and 4 respectively, he buys 5 oranges and 6 apples. In which situation is he better off and why?
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2 29. Two persons six miles apart, start walking towards one another at 4 mile per hour. Starting at the same time, a fly, travelling at 6 miles an hour, moves from the body of one person to the body of the other, and then back to the first, and so on. When the two persons met, what is the total distance the fly has travelled? 2
30.
Find the probability getting exactly 50 heads .. of an unbiased coin.
31.
Let A = [1] and B = [1, 2]. Determine which of the following statement are true:
(i) (ii) (iii) (iv) (v) (vi)
A . B A . B A . B 1 . A 1 . A 1 . B
Note: For any acts S and T we define S . T if and only if for every X, se S x e T: and S T if and only if S . T and S T| 3
32.
Calculate the rate of growth of demand for food grains in an economy where there is always full employment, where food grains are consumed only by the workers and where the following characteristics prevail: Rate of growth of work-force 2% per annum
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Rate of growth of the wage-bill Income elasticity of demand for foodgrains
7% per annum 0.6 3
33.
Let a end b be two arbitrary real numbers. Determine which of the following abatements are true? (i) (ii) (iii) (iv) (v) (vi) If a and b are rational numbers then a + b is a rational number. If a and b are rational numbers then ab is a rational number. If a is a rational number and b is an irrational number then a+b is an irrational number. If a is a rational number and b is an irrational number then ab is an irrational number. If a and b are irrational numbers then a+b is an irrational number. If and b are irrational numbers then ab is an irrational number. 3
34.
An economy has a saving propensity of .2 and an import propensity of .1. (i) (ii) (iii) If investment is 12,000 exports are 3,000, what is its level of income? What is its deficit on account of trade at this level of income? If it has to balance its trade then what should its level of investment be? 3
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35.
Let a, b and c be arbitrary real numbers. Determine which of the following statements are true? (i) (ii) (iii) (iv) (v) (vi) a>b a>b a>b a>b a>b a>b a+c>b+c ac > bc ac>bc a/c > b/c 1/a > 1/b -b > -a 3
36.
Show that : 13 + 23 + .. + (n 1)1 < n2 / 4. 3
37.
Show that : [|x| - |v| x v] 3
38.
Let and q be two functions defined for all real numbers, where (x) = 1+x and g(x) = 1-x. Compute the following: (i) (ii) (iii) .. .. ..
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(iv) (v) (vi)
.. .. .. 3
39.
The market for a good consists of 1000 buyers and 500 sellers. Each seller has the same supply function, which is given by: Supply = = O if price (p) 10 p 10 if price > 10
Each buyer has the same demand function, which is given by: Demand = = (i) (ii) o if price (p) 20 20 p if price < 20.
Find market demand and supply functions Calculate the market equilibrium price. 3
40.
The following table shows the total costs of producing various levels of output by a competitive firm: Output 0 1 2 Total costs 1.0 1.1 1.3
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3 4 5 6 7 8 9 10 (i) (ii) (iii)
1.7 2.3 3.0 3.0 5.0 6.5 8.2 10.0 What is the marginal cost of producing the 5 th unit of output? What is the average variable cost of producing 7 units of output? What is the profit maximizing output for the firm if the market price of the good is 1? 3
PART - D 41. 42. Show that the square root of 2 is an irrational number. 5
In country A it takes 120 labourers to produce 1 unit of good X, while in country B it takes 80 labourers to product 1 unit of X. In country A 100 labourers are needed to produce 1 unit of good Y, while in country B it takes 90 labourers to produce 1 unit of Y. Assume that each country has 72,000 labourers. (i) Calculate the production possibility set for each country.
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(ii)
Assume that in the absence of trade, each country uses half of its labour for producing each good. Calculate the amounts of the two goods produced in each country. 5
43.
In a closed economy output is given by: Y = min (.4K, 6L) Where K denotes capital stock and L is the labouor force. In period 1, out of the total labour force of 10,000, 1000 are unemployed. If the economy habitually saves and invests 15% of the output, and if the rate of growth of its labour force is 10% per period, what would be the percentage of unemployment n period? 5
44.
Consider the following information: (i) (ii) (iii) (iv) (v) (vi) (vii) There are 4 individuals A, B, C and D. Every individual has transitive preferences, i.e., the relation at least as good as is transitive for every individual. There are 4 alternatives x1, x2, x3 and x4. Individual A is indifferent between x 1 and x2. He is also indifferent between x3 and x4. He prefers both x1 and x2 to both x3 and x4. Individual B is indifferent between x 2 and x4. She prefers x1 to any other alternative. She also prefers x2 to x1. Individual C is indifferent between x 1 and x2. She prefers x4 to any other alternative. She also prefers x2 to x1. Individual D is indifferent between x1 and x2. She prefers x4 to any other alternative. She also prefers x1 to x2. Determine which of the alternative are Pareto-optimal. Explain your answer.
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PART E 45. Below are given 4 sets of 4 statements each. The number of true statements in any set is different from the number of true statements in any other set. A crime has been committed by one of the individuals X, Y, Z and W. Determine which of them is guilty. Set A (i) (ii) (iii) (iv) Set B (i) (ii) (iii) (iv) Set C (i) (ii) (iii) If both real numbers a and b are non-integers then a+b is also a non-integer real number. If a and b are real numbers then a/b is a real number. There is no real number which satisfies the equation x 4 + 2x2 + 1 = 0. If a is an integer and b is a non-integer real number then a+b is not an integer. There is a real number such that [x+1] = [x+2]. If subsidies are removed then a Pareto-superior situation results. Y has committed the crime. Square root of 5 is an irrational number. Every real number has a unique real cube root, Every cubic equation with real coefficients has at least one real root. X has committed the crime.
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(iv) Set D (i) (ii) (iii) (iv)
Z has committed the crime.
If a > b then 1/a < 1/b, where a and b are real numbers. Every non-negative real number has two distinct real square roots. Every rational number has a unique decimal representation. W has committed the crime. 10
46.
Write an essay on any one of the following topics (word limit 300 words). (i) (ii) (iii) (iv) (v) (vi) (vii) (viii) (ix) (x) Parliamentary Democracy. A Quota for Women in Parliament. Electoral Reforms. Should child labour be abolished? Cardinal utility and Ordinal utility. The concept of Surplus Labour. The Lorenz Curve. Pareto Optimality. De industrialization in India during the Colonial Period. The Environmental Question. 10
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SECTION I 1. Given that the aggregate consumption function is 5000 + O.Y and the level of investment in the economy is 10,000, the values of the multiplier and the national income respectively are: (a) (b) (c) (d) 5; 50,000 0.2; 2,000 5; 75,000 0.2; 7,500
2.
Given below are the Index of agricultural and industrial prices over a period of eleven years: Agriculture Industry : : 100 110 120 130 140 150 160 170 180 190 200 100 120 140 120 140 160 180 190 200 180 200
The ratio of agricultural prices to industrial prices moved in favour of agriculture in years. (a) 4, 8, 9 and 10
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(b) (c) (d)
4 and 10 None of the years. All the years except 5 and 11.
3.
If y = log (ex), what is dy/dx? (a) (b) (c) (d) (e) 1 ex x 0 Not defined.
4.
The fall of the Berlin wall (a) (b) (c) preceded the disintegration of the Soviet Union succeeded the disintegration of the Soviet Union was simultaneous with the disintegration of the Soviet Union
5.
For a commodity, the price measures and the quantity purchased falls. The total revenue (price x quantity) will remain the same if (a) (b) the change in price is greater than the change in quantity the percentage change to price is less than the percentage change in quantity
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(c) (d) (e)
the percentage change in price is greater than the percentage change in quantity the percentage change in price is three times the percentage change in quantity the percentage change in price is equal to the percentage change in quantity.
SECTION - II 6. A survey of 60 persons in Delhi shows: 19 read the Times of India. 18 read the Hindu, 50 read the Hindustan Times, 13 read the Times of India and the Hindu. 11 read the Hindu and the Hindustan Times. 13 read the Times of India and the Hindustan Times, 9 read all three newspapers. How many read no newspaper at all? How many read only the Hindustan Times?
7.
Consider two countries, each producing two goods. There is only one factor of production, labour. The following table gives the number of units of labour required to produce one unit of each good in each country: Commodities Country I II A 125 210 B 100 150
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Does any country have an absolute advantage in production of any good? Which country has comparative advantage in which good? Explain your answer.
8.
If you toss an unbiased coin 5 times, what is the probability that you will get at least 3 heads?
9.
Suppose you live in region consider migrating to region B, your income would be Rs. your getting a job in region your answer.
A with an assured monthly income of Rs. 3,000 and B only for economic reasons. If you get a job in region 8,000 per month; but you reckon that the probability of B is only 0.25. Will you still migrate? Give reasons for
10.
The growth rate of (GDP) of an economy, consisting of agriculture and industry is 7% per annum. The annual growth rate of agriculture is 4% and its share in GDP is 25%. If the annual rate of growth of industry is 8%, what is its share in GDP?
11.
Prove if disprove that 0.9=1 Let r be a fraction between 0 and 1. Consider a sequence S=1+r+r2 + +rn
12.
Derive the sum of this sequence, indicating the method. What happens if Let the cost per unit of output [C(x)] vary with the output (X) as X 2 b, X + a with b, a and x > 0. Let C(X) be positive for all X >C. Write the total and the marginal
13.
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cost functions and sketch the average and marginal cost functions. Do these two functions intersect? If yes.
14.
Derive the marginal utility schedule and the elasticity of the marginal (a) (b) (c) . .
15.
Suppose the labour supply curve facing an economys industrial employers to perfectly elastic at an institutionally fixed rea wage. Then (a) (b) (c) Draw the curve with real wage and labouor supply as axes. Can the level of employment be determined by considerations of the real wage alone? Why? If food prices increase by 10% what must happened money wages to satisfy the assumptions?
SECTION III Attempt any one of the following questions in the space provided: 16. Solve a2x/dr2 = -ax and indicate the conditions under which it generates oscillations. Apply it to a situation you are familiar with in your area of study.
17.
Define the term simple random sample. What is the difference between simple random sample and stratified random sample? In which situations would a stratified random sample be preferred, and why?
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18.
Define the Gini coefficient as a measure of inequality in the distribution of personal income. What are the problems and limitations of this measure?
19.
What is meant by underemployment equilibrium? Under what conditions can it occur?
20.
Consider a single product competitive firm which has the cost function of production C=40+10q + q2 [C = total cost of production, q = quantity of output]. The production process gives rise to pollution as per the functional rule w=q, where w is the gross pollution arising. However, pollution can be reduced by an amount r, undertaking abatement measures which would involve cost a=0.5r 2 (a is expressed in the same value unit as C). The cost of damage due to externality of net pollution arising for society in value unit is d=2 (w r)2. If the price of the product p is Rs. 40, find out the following: (a) (b) Profit maximizing partial equilibrium short-run output and net pollution. Social optimum output, reduction of pollution and net pollution of the firm in short-run.
SECTION I 1. The Discovery of India was written by
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(a) (b) (c) (d) (e)
M.K. Gandhi Jawaharlal Nehru Vallabhbhai Patel Mark Tully. V.S. Naipaul.
2.
The proportion of population living below the poverty line in India is currently estimated to be around (a) (b) (c) (d) (e) one-tenth one-third one-half two-thirds three-fourths
3.
Total consumption in an economy is given by C=1000+0.6Y where Y denoted total income. Total income equals the sum of consumption and investment expenditure. If investment is 10,000 then income is (a) (b) (c) (d) 20,000 20,500 27,500 80,000
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(e)
Impossible to calculate from this data
4.
The function x2 (1 x)2 attains its maximum at (a) (b) (c) (d) x= x=1 x=2 None of the above.
5.
A cylinder has a base of circumference x cm and a volume of 8x. Its height is (a) (b) (c) (d) (e) 4 cm 8 cm 32 cm 4x cm None of the above.
6.
We have the following data or a country: GDP at market prices = Rs. 20,000 crore Rs. Rs. 5,000 crore 3,000 crore
Gross Domestic Capital Formation = Depreciation =
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Exports Imports
= =
Rs. Rs. Rs. Rs.
3,000 crore 6,000 crore 2,000 crore 2,000 crore
Net invisible earnings from abroad = Indirect taxes less subsidies =
Then, the Net Domestic Product at factor cost is (a) (b) (c) (d) (e) Rs. 15,000 crore Rs. 16,000 crore Rs. 17,000 crore Rs. 18,000 crore Rs. 20,000 crore
7.
Consider the same country as in Question 6. The gross savings rate is (a) (b) (c) (d) (e) 10 per cent 15 per cent 20 per cent 25 per cent 75 per cent.
8.
The probability of drawing a red Queen from a pack of cards is -
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(a) (b) (c) (d) (e)
1/32 1/26 1/13 1/26 x 1/51 1/51 x 1/51
9.
Suppose X and Y are two positive valued random variables, each taking 10 values. Both have the same mean, but the variance of Y is twice the variance of X. Which of the following holds? (a) (b) (c) (d) (e) Max (Xi) > Max (Yi) Max (Xi) < Max (Yi) Max (Xi) = Max (Yi) Max (Xi) < Max (Yi) None of the above.
10.
Suppose the female wage rate in agriculture is 70% of the male wage are but women workers have 50% higher probability of finding employment than men workers. Then the exported wage income of women which is (a) (b) (c) higher than that of the men lower than that of the men the same as that of the men
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(d)
cannot say.
11.
Over a ten year period, the population of common.. (a) (b) (c) (d) remained the same increased decreased Cannot say.
12.
Suppose a country receives a large net inflow of portfolio capital from abroad, but there is no change in other capital transactions of in current account transactions on the external account. As a result, the level of foreign exchange reserves will (a) (b) (c) (d) increase decrease remain the same Cannot say
13.
In an economy the capital Rs.6,000 produces an annual stream of RS. 1,500. The Capital(a) (b) (c) 4 1/4 4 years
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(d) (e)
4 per year None of the above.
14.
The function (x) is defined as (x) = 1 if x is rational (x) = 0 if x is rational Then (x) is (a) (b) (c) (d) continuous everywhere continuous only at x rational continuous only at x rational nowhere continuous
15.
Define 1 x 1 = 1 = -1 Then 1 x 1 a implies (a) (b) (c) (d) a x a a x a Xa
if 1 > 0 if 1 < 0
None of the above.
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16.
Indifference curves of a consumer do not intersect because (a) (b) (c) (d) (e) marginal rates of substitution are assumed to be diminishing more is assumed to be preferred to less budget lines have to be tangential to indifference curves different indifference curves are assumed to measure different levels of utility All of the above.
SECTION II 17. We have the following data for two countries which each produces food and cloth using only labour: Labour hours required to product one unit of Food Country A Country B (a) (b) (c) 80 120 Cloth 90 100
Can these countries gain from trading with each other? Why? Which country will export food? Which country will export cloth?
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18.
An economy produces output Q=ALO by applying labour (L) to a fixed amount of land. A and a are consistants, and a=0.5. (a) (b) (c) Are there diminishing returns to the application of labour? If wages are equal to the marginal product of labour, what is the share of rent in output when employment is 100? What is the marginal product of labour when output is 200 and employment is 50?
19.
By working through the multiplier process, derive the level of aggregate demand in a closed economy where A is the level of autonomous demand and c is the propensity to consume. What happens if c > l? Consider the function (x) = log x x + 1 and let k be a constant. How many values of x will satisfy the equation? (x) = k if (a) (b) (c) K>0 K=0 K<0
20.
21.
Let S = 4p + p3 be the supply of a food when p is the price. Let D=10-5p be the demand for the same good of price p. Equilibrium is said to exist when there exists a positive p, such that S=D. Calculate p. S and D at the equilibrium. Such an equilibrium is said to be stable if at equilibrium Check whether the equilibrium you have obtained is stable.
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22
The players A and B have Rx 2 and Re 1 respectively. They play a game using tosses of a fair coin such that it pays A Re 1 when a had appears and A pays B Re 1 when a tail appears. The game stops when one of the players loses all her money. What is the probability that the game ends on an odd numbered toss with A losing all her money? Explain your answer. A consumer is assumed to maximise his utility function of the form u(x, y) where x and y are two goods consumed, subject to the constraint that the cost of the good consumed does not exceed his income. Let the price of both x and y be Re 1 per unit; let the consumers income be Rs. U(x) and let his utility function be u(x, y) = 5x + 7y. How much of x and y will the consumer consume? In a society each couple can have at most two children. English couple stops having children once they have a son. What is the expected proportion of females in the total population of this society? In 19990, workers obtained a wage of Rs. 1,000 and were observed to spend 40% of this on food, 30% on clothing and 30% on other items. By 1996, the money wage was Rs. 1,500, but during the intervening period food prices increased by 100%, cloth prices by 50% and prices of other items by 10%. (a) (b) What was the percentage change in real wages? If in 1996, workers are found consuming food, cloth and other items in the ratio 30:20:50 could they have afforded this same consumption bundle in 1990?
23.
24.
25.
26.
The demand curve faced by a monopolist whose production costs are zero, is the following: Q = 10 p when p > 5
= 30 p2 when p 5 Where Q is quantity and p is price.
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What choice of Q will maximise the monopolists profit and what will be the corresponding value of p? SECTION III 27. Four persons A, B, C and D have to share Rs. 4 among themselves in units of one rupee. First A proposes a distribution and all of them, including A, vote on it. If at least 50% of those voting agree with A, the proposal is accepted. If not, A loses her voting rights and B gets to propose a distribution and all except A vote on it. Once again, Bs proposed is accepted if at least 50% of those eligible to vote agree on it. If no, B also loses her voting eights and C gets to prove and so on to D. Assume that each person prefers more money to less, and will always vote against a distribution in which she gets zero. What distribution should A propose in the beginning? Explain your answer.
28.
Below are 3 sets of 4 statements each. The number of true statements in any set is different from the number of true statements in any other set. A crime has been committed by one of the individuals X, Y or Z. By indicating true or false against each statement, determine who has committed the crime. Set A (a) (b) (c) (d) There is a real number such that 1x + 11 1x + 21 The set (A Find x > 1, x > log x, X has committed this crime.
Set B
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(a) (b) (c) (d)
If a is a rational number and b is an irrational number, then (a + b) is an irrational number. Even if (x) < a and (x) > a, there need not exist; such that (x) = a. If GDP per capita in country A is higher than in country B, their everyone in A is better off than everyone in B. Y has committed the crime.
Set C (a) (b) (c) (d) There is no real number which satisfies the equation x 1 + 2x2 + 1 = U. If (x) is a maximized at x4 then [(x)]2 must also be maximized at x*. The sum of an infinite set of positive numbers must be infinite. Z has committed the crime.
SECTION IV 29. Attempt any one of the following questions in the space provided. Try to keep your answer within 500 words in length: (a) (b) (c) (d) Is there an economic case for land reforms in India today? Is a policy of caste-based job reservations an effective way of furthering social equity? Why? Will the reduction of import restrictions improve the efficiency of Indian industry? Why? What are the arguments for and against targeting in a public distribution system for food?
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(e) (f) (g) (h)
Ethical judgments can only be made under conditions of ignorance. Discuss. What is the case for a policy of prohibition of alcohol? What could be the economic consequences? A country like India cannot afford basic science research. Discuss. What is involuntary unemployment? Can it persist in a capitalist country even if employers have complete freedom to hire and fire workers?
1.
Define the following concepts and discuss their significance (in not more than 100 words each): 5 x3 =15 (a) (b) (c) Backward bending labour supply curve. Shut-down price Money multiplier.
2.
Answer the following questions (in not more than 100 words each): 5 x 5 = 25 (a) Let the cost function of a competitive firm be C = 0 if q = 0 and C = 1 + q 2 if q > 0. What is the firms supply curve?
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(b)
A monopolist can discriminate between two markets. The market demand functions are q1 = a1 + b1 p1 and q2 = a2 + b2 p2. The firms average cost is constant. Show that the pure monopoly output and discriminating monopoly output are identical. If a per unit production tax is levied in a competitive industry where all firms are identical, some firm will leave the industry but in the long run the output of those remaining unchanged. Is the statement true or false? Give reasons. Consider the following IS-LM model Y = f(y)+g(r)+G, fy>Ogr < O M = Ph(y, r), hy > Oh, < O Where Y is national income, (y) is consumption function, g(r) is investment function, r is rate of interest, h (y, r) is demand for money function and G, M and P, are exogenously given government expenditure, money supply and price level respectively. Let y and r denote equilibrium income and rate of interest respectively. Find the effect of an increase in government expenditure on y and r.
(c)
(d)
(e)
Consider the simple Keynesian model of determination of income. If the autonomous consumption is zero and the marginal propensity to consume is 1. What is the equilibrium level of income? Interpret your result.
3.
In a two-good pure exchange economy, an agent possesses initial endowments of two goods, X and Y. Suppose that the relative price of X rises. Show that (a) if the agent is a net seller of X and the price change does not alter the amount of X he sells, then X cannot be an inferior good and (b) if the agent is a net buyer of X and the price change does not alter the amount of X he buys, then X must be an inferior good. 10
4.
(a) (b)
Define n probability density function. Verify that the following constitutes a valid p.d.f.
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(x) = 1/-a x a (c) Find the mean and variance of the above distribution. 2 + 3 = 10 5. (a) (b)k y = x3 + x + 3. Check whether the inverse function exists and find dx/dy. Choose the correct answer and prove it: A B is logically equivalent to (i) (ii) (iii) (iv) (v) AB 5 + 5 = 10 6. Answer any two of the following questions (in not more than 300 words each): 15 x 2 = 30 (a) (b) (c) A model of competitive markets ignores the issues related to income distribution. Discuss with reference to Pareto optimality. What is elasticity pessimism in the context of exports? Discuss how it has shaped Indias development strategies in the Fifties and Sixties. Keynesian theory shows how income and employment can be increased in an economy that has not achieved full employment. Is this theory relevant in the Indian context? Discuss. BA AB BA AB
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ENTRANCE EXAMINATION, 2003 M.A. ECONOMICS 1. Define any five of the following concepts and discuss their significance (in not more than 100 words each): 5 x 5 = 25 (a) (b) (c) (d) (e) (f) Marginal utility Equilibrium under Cournot duopoly Deadweight-loss Keynesian multiplier Giffen good Spurious correlation.
2.
Answer any five of the following (in not more than 100 words each): (a) (b) (c) (d) The Keynesian model suggests that income falls with a rise in the savings rate. Therefore, people should save less. True or False? Why? Walras law holds even if the economy is not in equilibrium. True or False? Why? Government of India (GOI) owns many large public sector undertakings. Therefore, GOI is very rich. True or False? Why? Consider the following model for determination of the money supply. M=C+D H=C+R
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C = cD R = rD Where M is money supply, C is currency, D is deposits, R is reserves of commercial banks, C is publics currency-deposit ratio and r is Banks cash reserves as a ratio of deposits and H is the exogenously given high-powered money. Is the money supply infinite if r = 0? Give reasons. (e) Assume that the government can cost, lessly levy a profit tax on a monopolist. What will be the effect on equilibrium if the government reduces the rate of tax on profits from 50% to 30%? If there are two goods in an economy, a consumer maximizing utility subject to a budget constraint must consume both goods. True or False? Why?
(f)
3.
(a)
The following equation tell us the probabilities for different values of x. SPACE FOR EQUATION What is the probability that x has a value less than 2?
(b)
Suppose the probability of answering this probability question correctly is 0.4. Further, if this question is answered correctly the probability of getting admission is 0.75 and if this question is answered incorrectly the probability of getting admission is 0.25. Given that a candidate is selected for admission what is the probability that the candidate answered this question correctly? What is the problem with the following argument? Suppose a = b > O A2 b2
4.
(a)
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(a + b) (a b) = O Therefore, one solution is a + b = O 2a = O A=O (b) Suppose the profit function of a monopoly firm is f the form P (q) = 3 + q Where q denotes the output level. What is the optimal level of output? 4 (c) Solve for the following expression : Lim 5. x2 a2 / x a 15 x 2 = 30 (a) (b) The poorest in India are in the subsistence economy. Discuss whether they are likely to be affected by globalization. The budget of the Government of India shows a large deficit. Should this be reduced? If it is to be reduced, should this be done by raising taxes or reducing expenditures? Discuss. Is privatization the only solution for correcting the poor performance of public sector enterprises? Discuss.
Answer any two of the following (in not more than 300 words each):
(c)
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1.
Define any five of the following concepts and discuss their significance (in not more than 100 words each): (a) (b) (c) (d) (e) (f) Producers surplus. Monopolistic competition Backward bending supply curve. Supply creation its own demand. Marginal propensity to consume. Ordinal utility 5 x 5 = 25
2.
Answer any two of the following in not more than 100 words each: (a) (b) (c) (d) (e) Indian Airlines offers a 25% discount on its flights to and from the North-east. Does it constitute a case of profit maximizing price discrimination? Explain whether indifference curves of the same individual can intersect. A has a production function y = K1/2 L1/2. What will be the cost function of the firm if the price of a unit of both capital and labour is 1. The Reserve Bank of India has been cutting the rate of interest but the economy has not been picking up. Explain. A lawyer and some person have typing speed of 60 words and 40 words per minute respectively. The lawyer can earn Rs. 1000/per hour if he takes a case, while the other person can earn RS. 200/hour as he takes a case. Should the lawyer himself person as his secretary, or should they practice separately? Consider two alternative policies. Under the the elasticity of employment with respect to output is 10, and under the second policy the
(f)
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elasticity of employment with respect to output is 0.5. What policy would you prefer and why?
3.
(a) (b)
A coin is tossed four times. What is the probability that the outcome is at least two heads? 3 There are two sets of balls. The diameters of the balls in the first set are 8 inches, 9 inches and 10 inches, whereas the diameters of the balls in the second sets are 2 inches, 3 inches and 4 inches. Which set is more uniform? 3 At a given point of time the income, consumption sector of four individuals were (8, 1), (12, 3), (24, 6) and (40, 11) respectively. Suppose the fourth individuals had an income level of 45 instead. What do you think his consumption would have been? 3 Differentiate using first principles: (i) (j) Y = 2x + 2 / x Y = log x. 3
(c)
4.
(a)
(b)
Can the following system of equations be solved: 4x + 3y + 2z = 14 X + 2y + z = 8
12x + 9y + 6z = 25. (c) Maximise the expression (2y y2 + 5) (4x 2x2 + 5) Can this expression be minimized?
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5.
Answer any three of the following questions in not more than 300 words each. (a) (b) (c) (d) (e) Suppose restrictions on entry of foreign firms into the Indian economy is removed. What will be the impact? Students from both public and private schools attend private tuition. Is there a market failure here? Currently the rate of inflation in the Indian economy is low. Discuss whether this is good. Argue whether successful land reforms would lead to higher agricultural growth. Discuss whether a policy of trade liberalization can be adopted to reduce poverty 3 x 10 = 30
ENT. M.A. EXAMINATION, 2001 ECONOMICS (With Specialization in the World Economy)
1.
Define any five of the following in not more than 100 words each: (a) (b) The production possibility curve and its shape. Income Effect and Substitution Effect.
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(c) (d) (e) (f)
Public Goods. Balanced Budget Multiplier. Money Creation by Banks. Demonstration Effect. 5 x 5 = 25
2.
Answer any five of the following in not more than 100 words each: (a) Is marginal revenue equal to marginal cost an equilibrium condition under all types of market forms? Explain. If C = a + b O is a cost curve, which is the fixed cost and which is the variable cost? (b) (c) (d) Can the marginal cost curve cut the average cost curve from above? Discuss (use either diagrams or algebra). Given that the utility function of a consumer consuming two goods is y = x a yb derive the demand functions for this consumer. It is often argued that to raise the rate of growth of the Indian economy it is necessary to increase the savings rate. With a higher savings rate always lead to higher income? The Bank rate in Japan has been cut to almost zero. The government has cut taxes. Yet the economy remains depressed. Explain. There are two countries India and the US, and two goods garments and computers. The main hours required to produced a unit of garments and computers are 5 and 4 respectively in the US and 0 and 8 respectively in India. Discuss the pattern of production in the two countries if there is trade. If there is trade would it be beneficial to one country only or both? 5 x 5 = 25
(e) (f)
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3.
(a)
Mr. Researcher has found that in the last 10 general election that the ruling party has won a majority in the elections if the Indian cricket team has won the last home test series before the elections, and lost power if the Indian cricket team has lost the last home series. On this basis he predicts that the ruling party will retain power in the next election. How much confidence should you have in the prediction? 4 There are two black balls and 5 red balls in a bag. What is the probability of drawing 3 black balls and 3 red balls if you draw 6 balls from the bag in the case where there is replacement and in the case where there is no replacement? 4 If a probability of a c judge hand containing (i) (ii) at least 3 aces; only 1 five card suit? 3
(b)
(c)
4.
(a) (b)
Differentiate (i) y = 3x (ii) x = ox preferably using first principles.
Solve the following set of three equations in the three unknowns x, y and z, using Crammers Rule: 5x + 7y + 9z = 1 3x + 2y + 7z = -7 2x + 5y + 5z = 4 3
(c)
Maximize or minimize 8x + 12y 3z2 2y2 + 4xy 4
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5.
Answer any three of the following questions in not more than 300 words each: (a) (b) (c) (d) Discuss the relationship between factor size and productivity. Discuss analytically whether in the present circumstances in India the fiscal detail should be reduced. Examine whether only toss making public enterprises should be privatized as they are a drain on the public budget. Analyze in the market for electric power there is a single private producer. The government imposes a price ceiling. What will be its effect on the amount of power produced on consumers surplus and producers surplus? 3 x 10 = 30
ENT. EXAMINATION, 2000 ECONOMICS (With Specialisation in the World Economy)
1.
Define any five of the following concepts and discuss their significance (in not more than 100 words each) (a) (b) (c) (d) (e) Revealed Preference. External economies. Walras Law. Life cycles saving hypothesis. Money multiplier.
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(f)
Disguised unemployment. 5 x 5 = 25
2.
Answer any five of the following in not more than 100 words each: (a) (b) A rise in interest rate increases the opportunity cost of current consumption. Will this induce everyone to increase his savings? Explain graphically. A monopolist has consistant average cost and faces a linear demand curve. If a per unit production tax is levied, will this raise price by more or less than the amount of the tax? A profit maximizing monopolist experiences a technical change which towards his total costs for evry output level. Prove that this increase his profits. You may not assume anything about his marginal cost curves. Show that, under constant returns to scale, diminishing marginal productivity of inputs implies that more of one input raises the marginal product of the other. How does a lump-sum subsidy to each of the firms in a competitive industry affect the output of the original firms? Show that in long run competitive equilibrium the marginal firm produces an output large than that which minimizes as average variable cost.
(c)
(d)
(e) (f)
3.
(a)
Obtain E(X E(X)2) for the following density 1/7 0<x<7 Function (x) = 0 otherwise
(b)
In a society, each couple can have at most two children. Each couple stops having children once they have a son. What is the expected proportion of
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female in the population? Assume that the probability of having a son is equal to that of having a daughter. 5
4.
(a)
Invert the matrix: a 0 0 0 0 b 0 0 0 0 c 0 0 0 0 d
(b)
Sum : ..
(c)
Solve: (1 + X) y dx + (1 y) x dy = 0
5.
Answer any three of the following questions in not more than 300 words each: (a) (b) What is the transaction demand for money? Show how it depends on the rate of interest. Compare the relative magnitudes of the multiplier in the simple Keynesian and the IS-SM models and identity the situation in which the two magnitudes will be identical. Discuss the role of monopolies in stimulating or retarding technical progress. After three years of rapid growth from 1993-94 to 1995-96, the Indian economy faltered into a recession from which it is only now beginning to recover. Can you account for the recession and the recent recovery?
(c) (d)
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(e)
Examine the comparative merits of the ability to pay and the benefit principles as bases for taxation. 3 x 10 = 30
M.A. ALL INDIA ENTANCE EXAMINATION, 1999 ECONOMICS (With Specialisation in World Economy)
1.
Define the following concepts and discuss their significance: (a) (b) (c) (d) (e) The Permanent Income Hypothesis. The Liquidity Trap. The Phillips Curve. The Production Possibility Frontier. Elasticity of Substitution.
2.
Answer any five of the following questions? (a) Describe the supply curve of a monopolist.
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(b)
The owner of a mineral spring, who sells his water to bottlers through a commission agent, pays 10% of his sales value as commission. A publisher pays exactly the same fraction of his sales to his author. But while the spring owner and his agent are always in perfect agreement, the author and his publisher argue endlessly about the price of the book. Is this because authors are inherently quarrelsome or is there a deeper economic reason? Assume that all workers have identical leisure-income preferences. Firms deny workers the freedom to choose how much to work; they offer instead a package of a given wage rate and a specific work-load not necessarily the despite this, competition among firms leads to an equilibrium in which the worker works exactly as much as would maximize his utility at the equilibrium wage. A villager spends all his income on food and clothes (neither of them inferior goods). He buys food in the village, but must travel by bus to town to buy clothes. When the bus fare rises, will he buy more food or less (i) if he continues to buy both goods, (ii) if he stops buying clothes altogether? How many different Pareto-optima are possible in each of the following situations: (i) (ii) Raja and Rani, both of whom like cake, are dividing a cake between themselves. Jack Sprati could eat no fat. His wife could eat no lean; And, between the two of them. They liked the platter clean.
(c)
(d)
(e)
(f)
In a two consumer two-good economy. A has an endowment X of good X and B an endowment 9 of good Y. If the markets are competitive, what is the equilibrium relative price of Y if As utility function is X A YA and Bs utility function is X0 Y0 (XA YA and X0 Y0 being As and Bs consumption of the two goods respectively.
3.
Answer any three of the following questions in not more than 300 words. 3
x 10 = 30
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(a) (b) (c)
Examine the characteristics of public goods and the problems involved in their pricing and supply. Account for the stagnation of the Indian economy in the mid-sixties and seventies and its revival thereafter. N identical buyers for a product each have a demand curve p = 10 2q. The cost of production is C(Q) = 2Q + K where Q is total output: (i) (ii) Suppose K = 0. For social welfare to be maximized, what quantity should each buyer get (there are no externalities)? If K = 32, what is the smallest N at which a perfectly discriminating monopolist can cover costs? Why is this the smallest population for which production of the good is socially desirable? Suppose K = 0 and N = 100. The goods is produced by a monopolist who cannot price-discriminate. What price will he set? Compute the welfare loss compared to the socially optimal output.
(iii)
(d)
What are the causes of wage rigidly and what are its macroeconomic consequences?
(a) (b)
The function (x) = cxe-2 for all real non-negative x is the probability density function of x. Determine c. 5 Consider events A, B and C with Prob (A) > Prob (B) > Prob (C) > 0. Even A and B are mutually exclusive and collectively exhaustive. Events A and C are independent. Can B and C be mutually exclusive? 5 Consider the identity x2 = . If we differentiate the L.H.S. we get 2x. But if we differentiate the R.H.S. we get the sum of x ones, or x.
(a)
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The derivatives of two sides of an identity should be the same. Why are they different here? 5 (b) Prove that the following determinant:
Space for table
M.A. ENTRANCE EXAMINATION, 1997 M.A. ECONOMICS (WITH SPECIALISATION IN WORLD ECONOMY)
PART A (This Part has 20 multiple-choice questions. Each question is of 1 work. You are required to do all 20 questions.)
1.
The annual inflation rate in India (in terms of the Wholesale Price index in the last five years has been in the range of (a) (b) (c) 0 4 per cent 5 10 per cent 11 15 per cent
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(d)
15 20 per cent.
2.
If a, b are real numbers and a > b, then it is necessary that (a) (b) (c) (d) a2 < b2 a < b a.c < b.c for any real number c. a c < b c for any real number c.
3.
The share of the primary sector in the Indian Labour.. around (a) (b) (c) (d) 40 per cent 50 per cent 60 per cent 70 per cent.
4.
A dice has given the number 6 on five consecutive throws. What (x) is the probability that the next throw will also give the number 6? (a) (b) (c) (d) 0 1/30 1/6 5/6
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5.
The country with the largest external debt in the world today is (a) (b) (c) (d) Brazil Argentina China United States
6.
If a, b are two distinct real numbers both greater than unity, then it must be the case that (a) (b) (c) (d) a/b<1 a/b>1 a + b > 2a.b a + b < 2a.b
7.
The beginnings of modern industry in India occurred in (a) (b) (c) (d) the late 18th century the beginning of the 19th century the middle of the 19th century the turn of the 20th century
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8.
There are two egg delivery boys you can order eggs from. The probability of the first boy falling and breaking all the eggs is and the probability of the second boy falling and breaking all the eggs is 1/5. How would you distribute your order for eggs so as to minimize the risk of total loss of eggs? (a) (b) (c) (d) Order all your eggs from the first boy Order all your eggs from the second boy. Distribute the order for eggs between the two boys. Cannot say on the basis of this information.
9.
Which of the following is not a total of monetary policy? (a) (b) (c) (d) The tax rate. The interest rate. The Cash Reserve Ratio. Open market operations of the central bank.
10.
The Lewis model of industrialization (a) (b) (c) (d) involves industry supplying labour to agriculture involves agriculture supplying labour to industry requires the wage rate in agriculture to fall requires the wage rate in industry to fall
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11.
For an economy, the long-run rate of growth of GDP is 5 per cent per annum at full employment. The investment rate is 20 per cent and the rate of growth of labour force is 2 per cent per annum. Then the capital-output ratio is (a) (b) (c) (d) 2 5 7 10
12.
If the short-run average cost curve for a firm is a decreasing function of its output over a certain range, then in that range (a) (b) (c) (d) the firms marginal cost curve must also be decreasing the marginal cost curve will lie below the average cost curve. Assuming that output is plotted on the horizontal axis and the costs are on the vertical axis the location of the marginal cost curve is uncertain since it depends on whether the firm is a competitive one or not the marginal cost curve will lie above the average cost curve, assuming that output is plotted on the horizontal axis and the costs are on the vertical axis
13.
Between 1900 and 1950 in India (a) (b) (c) agricultural output grew faster than industrial output agricultural output grew slower than industrial output agricultural output grew at the same rate as industrial output
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(d)
neither sectors output grew at all.
14.
Let S = 1 + + 1/3 + + Then S is equal to (a) (b) (c) (d) 3 4 6 The sum does not converge to any finite value.
15.
Special Drawing Rights are (a) (b) (c) (d) a means by which the government can draw money from local banks a means by which the government can use the foreign exchange reserves of the central bank to finance a fiscal deficit an international reserve asset created by the International Monetary Fund funds which the World Bank and the International Monetary Fund exchange among themselves
16.
If the demand curve facing a monopolist is given by p = 10q *-1.5, then the output sold b y the monopolist (a) (b) cannot be determined by maximum profit is determined by maximizing profits
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(c) (d)
is determined by maximum profits provided the cost is constant is determined by maximum profits provided the cost is an increasing function of output
17.
In a closed economy, the aggregate consumption function is of the form C = a + 0.8). The value of the multiplier is (a) (b) (c) (d) 1 4 5 8
18.
Which of the following will be an inverse function of (x) = 1/x? (a) (b) (c) (d) g(y) = y g(y) = 1/y g(y) = y2 g(y) = 1/2 y
19.
A foreign institutional investor who will settle only for returns in excess of 10 per cent, is considering converting dollars into rupees to purchase a stock that is valued at Rs. 100 but is expected to appreciate in value to Rs. 100 at the end of one year. If the investing entity expects the rupee to depreciate in value from Rs. 50 to the dollar Rs. 52.50 to the dollar in that year, it would purchase the stock only if the firm is expected to pay a dividend of
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(a) (b) (c) (d)
Rs. 3 per share Rs. 2.50 per share Rs. 5 per share More than Rs. 5 per share.
20.
Suppose Tata Steel sells Rs. 1,50,000 worth of steel to Maruti Suzuki Company and other producers sell Rs. 1,00,000 worth of other inputs to Maruti Suzuki. Maruti Suzuki then uses the steel and other inputs to make a car which it sells to a dealer, Competent Automobiles, for Rs. 3,00,000. Then the dealer sells the car to a consumer for Rs. 3,50,000. What is the total contribution to GDP made by the entire series of transactions? (a) (b) (c) (d) Rs. 3,00,000 Rs. 3,50,000 Rs. 2,50,000 Rs. 1,00,000
21.
Explain the difference between direct and indirect taxes, with 2 examples of each.
PART C
22.
Write an essay on any one of the following topics: (a) The need for a universal employment guarantee scheme in rural India.
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(b) (c) (d) (e) (f)
Business process outsourcing. Why Indias foreign exchange reserves are increasing. Utility Possibility Curves. The new patents regime in India. Competitive markets and optimality.
ENTRANCE EXAMINATION, 2006 M.A. ECONOMICS (With Specialization in the World Economy)
1.
Discuss the significance of the following concepts (in not more than 100 words each): 5 x 3 = 15 (a) (b) (c) Price elasticity of demand Diminishing marginal rate of substitution. Permanent income hypothesis.
2.
Answer the following questions (in not more than 100 words each): (a) Madhu spends all her income on the two goods, Limca and Coke. She views Limca and Coke as perfect substitutes. The price of a 200 ml can of Limca, p, is less than the price of a 200 ml can of Coke, p*. What does Madhus Engel
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curve for Limca look like? How much does her weekly soft drink budget have to rise for her to buy one more can of Limca per week? (b) Consider the paper industry that produces a negative externality in the form of wastes that cause water pollution. Suppose the inverse demand curve for paper is p = 200 Q, where p and Q are the price and quantity of the paper produced, respectively. The private marginal cost is MCP = 80 + Q, and the marginal harm from waste is MCW = 3Q. (i) (ii) (c) What is the equilibrium for the monopolist? How would this equilibrium change if the monopolist has to pay for the marginal harm from the waste?
Suppose the economy has autonomous investment and the rate of savings depends only on income. What will be the slope of the IS curve?
3.
Consider an economy with two consumers I = 1, 2 and two goods x and y, with x i, yi being the quantities of the goods consumed by consumer I, and Px and Py denoting the prices of the two goods. The consumers have the following utility functions and endowments: u1(x1, y1) = x11/2 y11/2, u2(x2, y2) = x2 y2 + in y2 (a) (b) (c) e1 = (6, 2) e2 = (2, 6)
Derive the contract curve for this economy. Compute the competitive equilibrium for the economy. Find an allocation for this economy that is Pareto optimal but not a competitive equilibrium for the given endowments for the consumers. 5 + 5 + + 5 = 15
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4.
(a)
Five non-similar pairs of gloves are in a closet. Four gloves are drawn at random. What is the probability that there will be at least one complete pair among the four gloves? There are 1000 candidates for a competitive examination. Out of these 200 opt for Coaching School A, 300 for School B and 500 for School C. Past experience suggest that the probability of success is 5%, 15% and 10% for A, B, C coaching schools respectively: (i) (ii) A candidate is chosen at random from a school. What is the probability that he would fail? Assuming that a candidate fails, what is the probability that he was from School A? 2+2=4
(b)
(c)
1000 IT professionals migrate from Bangalore (B) to the Silicon Valley (SV). A researcher calculates the mean IQ of IT professionals in the two locations, B and SV, before and after migration. xu and xSV mean before migration yB and ySV mean after migration and notes that yB > xB and ySV > xSV (namely, the average IQ has gone up in both locations after migration). Explain if this is possible or whether he has made some errors in calculation. 3
5.
(a)
Let (x) = Ax12/3 x21/3 where A = 3 / 41/3 and x = (x1, x2) is a vector. Show that (i) (ii) the function (x) is increasing in x1, f = 1, 2; concave in x;
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(iii) (b)
linearly homogeneous. 1+2+2=5
Find the extreme value of Z = 8x3 + 2xy 3x2 + y2 + 1 5
6.
Answer any two of the following questions (in not more than 300 words each) 15 x 2 = 30 (a) (b) Liberalization of international trade is good but liberalization of international capital flows is bad. Do you agree? Explain your answer. We know from Keynesian Economics that higher budget deficits lead to higher level of income. India is a poor country, so in order to raise income the budget should be raised. Do you agree with this view? Discuss. Privatisation of telecommunication has resulted in improved telecommunication services at lower price. Do you expect the same to happen if supply of electric power in India is privatized? Give reasons for your answer.
(c)
ENTRANCE EXAMINATION, 2005 M.A. ECONOMICS (With Specialization in the World Economy) 1. Discuss the significance of the following concepts (in not more than 100 words each): 5 x 3 = 15 (a) Purchasing power parity
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(b) (c)
Price discrimination. Balanced budget multiplier.
2.
Answer the following questions (in not more than 100 words each): (a) Derive the demand functions from the following utility function: U (x, y) = xy (b) According to anti-programme a purchase up to 10 kg of rice is subsidized and quantities purchased in excess of 10 kg are taxed. If a family is neither better off nor worse off as a result of the programme, show that it receives a net non-negative subsidy. Suppose 20 people live on a street and that each of them is willing to pay Rs. 3 for each extra street light, regardless of the number of street lights provided. If the cost of providing z street lights is given by C(z) = z2, what is the Pareto efficient number of street lights to provide? Consider the following 2 Country macroeconomic model: Y1 = a + bY2 Y2 = c + dY1 where Y1 and Y2 are the real national incomes of Country 1 and Country 2 respectively, and a, b, c and d are parameters. Put suitable restrictions on the parameters. (e) Aggregate output of an economy (Y) is produced by capital (K) and labour (L) with the following technology: Y = K1/2 L1/2. In the short run, K = 4. The aggregate labour supply function is (w/ p)2, where w is the money wage rate and p is the price level. Find the aggregate output and the real wage rate in full employment.
(c)
(d)
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3.
A consumer has fixed stocks of two goods, x 1 and x2 and maximizes the utility function u(x1, x2) subject to the fact that his expenditure on the two goods cannot exceed the market value of the stocks he possesses. Formulate the consumers optimization problem, derive the first-order conditions and show that in general the consumer will sell one good and buy the other. Also show that the compensating variation of an increase in the relative price of a good is positive or negative depending on whether the consumer is a net buyer or a net seller of the goods 10
4.
(a)
There are three identical looking envelopes in a drawer. The first contains two Rs. 50 notes and three Rs. 100 notes, the second contains four Rs. 50 notes and one Rs. 100 note, and the third contains five Rs. 100 notes. If you are allowed to pick one envelop at random, and draw one note blind folded, what would be your expected earning?
(b) (c)
You have six close friends. How many ways can you invite one or more of them to your birthday party? Given the following information on two data sets: I : n1 = 20, X1 = 25, a12 =5 II: n2 = 30, X2 = 20, a22 = 4 Find the mean and variance (X and a2) of the composite data. 3 + 3 + 4 = 10
5.
(a)
Find .
(b)
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(c)
. then show whether the function (x) (i) is continuous at x = 1, (ii) is differentiable at x = 1.
(d)
Let (x) = 2 + x2 2x. Determine the maximum value of on the interval [0, 1]. 2 + 2 + 2 + 4 = 10
6.
Answer any two of the following questions (in not more than 300 words each): 15 x 2 = 30 (a) (b) An economy is characterized by a fairly high fiscal deficit, yet the inflation rate stays fairly low. Explain. When would an economy be considered to have excess foreign exchange reserves? If you think that India has excess reserves, should it invest threes in developing some sectors of the economy, such an infrastructure? What is a merit good? How would you decide whether primary education or higher education is a merit good? ****************
(c)
PART A This section has 10 multiple choice questions. Each question is of 1 mark. You are required to do all 10 questions.
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1.
Indifference curves are downward sloping because. (a) (b) (c) (d) more of a good is better there is constant marginal rate of substitution there is increasing marginal rate of substitution there is decreasing marginal rate of substitution
2.
The value of the price elasticity of demand: (a) (b) (c) (d) depends on the units used to measure quantities depends on the units used to measure price is the same as the slope of the demand curve does not depend on units of measurement of either price or quantity
3.
A 5% increase in income leads to 1 12% increase in the demand for mobile phones. It follows that (a) (b) (c) (d) income elasticity of demand is 2.4 and mobile phones are normal goods income elasticity of demand is 2.4 and mobile phones are inferior goods income elasticity of demand is 0.24 and mobile phones are normal goods income elasticity of demand is 0.24 and mobile phones are inferior goods
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4.
in the expression (x a) (x b) (x - c)..(x z), a, b, c, d are the letters of the alphabet and appear at least once. X is one of the letters of the alphabet. The value of the expression is (a) (b) (c) (d) zero infinite unity None of the above.
5.
If a.b < c.d, where a, b, c, d are non-zero numbers, then it must be that (a) (b) (c) (d) a/c < d/b a/c < d/b, if a.b > 0 a/c > d/b, if a.b > 0 None of the above.
6.
A random variable is (a) (b) (c) (d) an elementary outcome an event in the sample space a number assigned to an event a probability of an event
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7.
Two events are said to be independent if (a) (b) (c) (d) Prob (A and B) = Prob (A) - Prob (B) Prob (A and B) = Prob (A) + Prob (B) Prob (A/B) = Prob (A) - Prob (B) None of the above.
The country which is the largest borrower from the rest of the world is (a) (b) (c) (d) China Russia India USA
9.
A nation invests all it saves and its ate of saving is 30 per cent. If the annual rate of growth of that country is 6 per cent, then the production conditions must be such that it delivers a unit increment in output for every (a) (b) (c) (d) 2 units of investment 3 units of investment 5 units of investment 10 units of investment
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10.
Market capitalization in the Bombay Stock Exchange (BSE) rose by 100 per cent in a single year. This means that (a) (b) (c) (d) the Sensex rose by 100 per cent during that year the value of shares traded at the BSE over the year increased by 100 per cent when compared with the previous year. The value of all outstanding shares of companies listed at the BSE rose by 100 per cent The prices of every share listed at the BSE rose by 100 per cent
PART B This section has 12 questions. Each question is of 5 marks You are required to do all 12 questions. 11. In a competitive market, demand and supply curves are given by Q d = 3 / p and Q5 = p 10. Consider the effect of imposing a tax at the rate of t per unit. Obtain an expression for the revenue R obtained from the tax as a function of t. An individual always consumes goods x and y in the fixed proportion of 2 : 1. If the price of x is Rs. 10 per unit and the price of y is Rs. 5 per unit, compute the price elasticity of demand for good x.
12.
13.
Consider the problem: Maximize 3x + y x 0, y 0
Subject to y+ 5x = 10,
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Obtain a solution and check that the solution you have is indeed a maximum.
14.
There are two investment opportunities : (a) (b) X earns interest at the successive per annum rates of 8%, 10% and 12% in three years Y earns interest at the successive per annum rates of 12%, 10% and 8% in three years
Assume that interest is compounded one yearly. Which option would you recommend and why?
15.
Take any five distinct real numbers and show that the maximum of the absolute values of these numbers may be equal to the absolute value of the minimum of these numbers.
16.
In answering a question in a multiple choice test, a student either knows the answer or guesses. Let p be the probability that the knows the answer and 1 p the probability that she guesses. Assume that the student who guesses at the answer you will be correct with probability 1/m, where m is the number of multiple-choice alternatives. What is the conditional probability that the student knew the answer to a question given that the student knew the answer to a question given that she answered at correctly?
17.
It is given that a continuous random variable x is distributed uniformly over the interval [O, a]. The probability density function is (x) = 1/a. It is also known that the mean of the random variable is 2. What is the value of a?
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18.
One of A, B, C and D has committed a crime with the help of another one of them. Here are the statements given by the four individuals. The statements of the criminal and his accomplice are false and those of the remaining two are true. A: B: C: D: If B is guilty of something, then C must be innocent. If A is innocent, then C must be guilty. If B was the killer, then D must have had nothing to do with the crime. I am innocent.
Which one of the four is the criminal and who was his accomplice?
19.
Suppose labour and capital equipment are used, in fixed proportions in the production of output in a closed economy. Suppose the existing capital equipment is utilized fully but a quarter of the labour force is unemployed. Let Y, C and I represent aggregate levels of income, consumption expenditure and investment expenditure in the economy in rupees at constant prices. Let C = 100+0.6Y, I=500 and G=200. (a) (b) (c) Calculate the level of income in the economy. If the government raise its nominal expenditure to 400, then what is the increase in real income in the economy? If the government raises its nominal expenditure to 400, then what is the fall in the percentage of unemployed in the economy?
20.
In an economy with unlimited supplies of labour the wage rate is fixed at0.5 unit of consumption good per period. The economy has a stock of machines, each of which employs one unit of labour to produce either one unit of itself or one unit of consumption good. (a) What is the relative price of the consumption good in terms of the machine?
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(b)
What is the rate of profit in the economy?
21.
The following data are given for an economy: Rs. GDP at factor cost Depreciation Net factor income from abroad Net indirect taxes Gross savings of the economy Gross investment of the economy Gross fiscal deficit Calculate : (a) (b) (c) (d) (e) Net Domestic Product at factor cost Net domestic Product at market prices Net National Product at market prices Current Account Deficit in the Balance of Payments The excess of Private Investment over Private Savings. 10,000 500 -1,000 1,500 2,600 3,000 150
22.
The following data are given for an economy :
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Investment = 5,000 and Exports = 1,000 If the ratio of imports to national income is always 0.1 and the ratio of savings to national income is always 0.2, then (a) (b) (c) calculate the national income of the economy; calculate the trade balance; at this level of exports, investment and import ratio, what should the national income be if the economy is to have balanced trade?
PART C This section has 2 questions. Each question is of 10 marks. You are required to answer both
23.
Read the following passage carefully and answer the questions that come after it : The importance of public revenue to the under developed countries can hardly be exaggerated if they are to achieve their hopes of accelerated economic progress. Whatever the prevailing ideology or political colour of a particular government, it must steadily expend a whole host of non-revenue yielding services education, health, communication system and so on as a prerequisite for the countrys economic and cultural development. These services must be financed out of government revenue. Besides meeting these needs, taxes and other compulsory levies provide the most appropriate instruments for increasing savings for capital formation out of domestic sources. By providing a surplus over recurrent expenditure, they make it possible to devote a higher proportion of resources of building up capital assets. The fact is that in relation to gross national product, the tax revenue of the underdeveloped countries is typically much smaller than in his advanced countries. Is this an inevitable consequence of their poverty? No, the shortfall in revenue is
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largely a reflection of failure to tax the wealthier sections of the community effectively. Questions: (a) (b) (c) (d) (e) Why does the author see public revenue as necessary for development? How can taxes help in building productive assets in an economy? Which group of countries does the author identify as having lower ratio of taxes to national income? What does the author identify as the major cause of this tendency for lower ratios of taxes to national income? What is meant by a surplus over recurrent expenditure?
24.
Read the following table carefully and answer the questions after it:
SPACE FOR TABLE Notes: 1. 2. Data in column 2-6 are in million tones. Population data column 7 are in million persons Net availability of foodgrains is defined as follows: Not availability of foodgrains = Production + Net imports = Change a Government stocks. Questions: (a) Did government stocks increase or decrease between 1998 and 2001?
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(b) (c) (d) (e)
Did net exports increase or decrease between 1991 and 2002? What was the absolute change in the per capita availability of .grains between 1993 and 1998? Did off take from the public distribution system increase or decrease between 1996 and 2001? Compare the percentage increase of foodgrain production and population between 1993 and 2003.
PART D This part carries 10 marks
25.
Write an essay on any one of the following topics: (a) (b) (c) (d) (e) Discuss the view that Indias food stocks indicate that Indian agriculture is not monsoon dependent because of the Green. Revolution. Is the increase in per capita income of a country a good indicator of development? Are Indias Government sector and Government employment too large for a poor country? Is the recent rise of the Sensex an indicator of the health of the Indian economy? Is there necessarily a trade off between unemployment and inflation?
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PART A (This part has 20 multiple choice questions. Each question is of 1 mark. You are required to do all 20 questions.)
1.
The annual inflation rate in India (in terms of the Wholesale Price Index) in the last five years has been in the range of (a) (b) (c) (d) 0 4 per cent 5 10 per cent 11 15 per cent 15 20 per cent
2.
If a, b are real numbers and a < b, then it is necessary that (a) (b) (c) (d) A2 < b2 a < b a.c < b.c for any real number c a c < b c for any real number c
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3.
The share of the primary sector in the Indian labour force in 2000 was around. (a) (b) (c) (d) 40 per cent 50 per cent 60 per cent 70 per cent
4.
A dice has given the number 6 on five consecutive throws. What is the probability that the next throw will also give the number 6? (a) (b) (c) (d) 0 1/30 1/6 5/6
5.
The country with the largest external debt in the world today is (a) (b) (c) (d) Brazil Argentina China United States
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6.
If a, b are two distinct real numbers both greater than unity, then it must be the case that (a) (b) (c) (d) a/b < 1 a/b > 1 a + b > 2a.b a + b < 2a.b
7.
The beginnings of modern industry in India occurred in (a) (b) (c) (d) the late 18th century. The beginning of the 19th century the middle of the 19th century the turn of the 20th century
8.
There are two egg delivery boys you can order eggs from. The probability of the first boy falling and breaking all the eggs is and the probability of the second boy falling and breaking all the eggs is 1/5. How would you distribute your order for eggs so as to minimize the risk of total loss of eggs? (a) (b) (c) (d) Order all your eggs from the first boy Order all your eggs from the second boy Distribute the order for eggs between the two boys Cannot say on the basis of this information
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9.
Which of the following is not a tool of monetary policy? (a) (b) (c) (d) The tax rate The interest rate The Cash Reserve Ratio Open market operations of the central bank.
10.
The Lewis model of industrialization (a) (b) (c) (d) involves industry supplying labour to agriculture involves agriculture supplying labour to industry requires the wage rate in agriculture to fall requires the wage rate in industry to fall
11.
For an economy, the long-run rate of growth of GDP is 5 per cent per annum at full employment. The investment rate is 20 per cent and the rate of growth of labour force is 2 per cent per annum. Then the capital output ratio is (a) (b) (c) (d) 2 5 7 10
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12.
If the short-run average cost curve for a film is a decreasing function of its output over a certain range, then in that range (a) (b) (c) (d) the firms marginal cost curve must also be decreasing the marginal cost curve will lie below the average cost curve, assuming that output is plotted on the horizontal axis and the costs are on the vertical axis the location of the marginal cost curve is uncertain since it depends on whether the firm is a competitive one or not the marginal cost curve will lie above the average cost curve, assuming that output is plotted on the horizontal axis and the costs are on the vertical axis
13.
Between 1900 and 1950 in India (a) (b) (c) (d) agricultural output grew faster than industrial output agricultural output grew slower than industrial output agricultural output grew at the same rate as industrial output neither sectors output grew at all
14.
Let S= 1 + + 1/3 + + Then S is equal to (a) (b) 2 4
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(c) (d)
6 The sum does not converge to any finite value.
15.
Special Drawing Rights are (a) (b) (c) (d) a means by which the government can draw money from local banks a means by which the government can use the foreign exchange reserves of the central bank to finance a fiscal deficit an international reserve asset created by the International Monetary Fund funds which the World Bank and the International Monetary Fund exchange among themselves
16.
If the demand curve facing a monopolist is given by p = 10g -1.5+, then the output sold by the monopolist (a) (b) (c) (d) cannot be determined by maximum profits is determined by maximizing profits is determined by maximum profits provided the cost is constant is determined by maximum profits provided the cost is an increasing function of output
17.
In a closed economy, the aggregate consumption function is of the form C = a + O. SY. The value of the multiplier is (a) 1
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(b) (c) (d)
4 5 8
18.
Which of the following will be an inverse function of (x) = 1/x? (a) (b) (c) (d) g(y) = y g(y) = 1/y g(y) = y2 g(y) = y
19.
A foreign institutional investor who will settle only for returns in excess of 10 per cent, is considering converting dollars into rupees to purchase a stock that is valued at Rs. 100 but is expected to appreciate in value to Rs.110 at the end of one year. If the investing entity expects the rupee to depreciate in value from Rs. 50 to the dollar to Rs. 52.50 to the dollar in that year, it would purchase the stock only if the firm is expected to pay a dividend of (a) (b) (c) (d) Rs. 3 per share Rs. 2.50 per share Rs. 5 per share More than Rs. 5 per share.
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20.
Suppose Tata Steel sells Rs. 1,50,000 worth of steel to Maruti Suzuki Company and other producers sell Rs. 1,00,000 worth of other inputs to Maruti Suzuki. Maruti Suzuki then uses the steel and other inputs to make a car which it sells to a dealer, Competent Automobiles, for Rs. 3,00,000. Then the dealer sells the car to a consumer for Rs. 3,50,00. What is the total contribution to GDP made by the entire series of transactions? (a) (b) (c) (d) Rs. 3,00,000 Rs. 3,50,000 Rs. 2,50,000 Rs. 1,00,000
PART B (This Part has 12 questions. Each question is of 5 marks. You are required to do all 12 questions.)
21. 22.
Prove that the sum of the first n odd integer is n2. A and B are playing the following game. A starts and tosses a fair coin. If the outcome is head, A wins. If A fails to win, he passes the coin to B, who then attempts to win on her toss (as before, a win occurs if the outcome is head). They continue to toss the coin back and forth until one of them wins. What is the probability of A winning the game? The following information is given for an economy (all figures in Rs. Crores): GDP at factor cost 22,000 1,500
23.
Net factor income from abroad
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Depreciation Exports Imports Gross investment Gross savings Net indirect taxes
1,000 5,000 6,000 7,400 4,500 3,000
Calculate (a) the trade deficit, (b) the current account deficit, (c) GNP at factor cost, (d) NNP at factory cost and (e) NNP at market prices. 24. If the rate of interest is 10% per annum, compounded annually, when one of the following alternatives would you choose and why? (a) (b) (c) Rs. 215 received after 2 years Rs. 100 received twice : once at the end of one year and once at the end of two years Rs. 100 received now and Rs. 95 received after two years.
25.
How do banks create money? (Answer within 100 words)
26.
In year 0, industrial workers devote 50 per cent of their total expenditure to food, 25 per cent to housing and 25 per cent to clothing. Between year 0 and year 1, the prices of these 3 items increase by 15 per cent. 12 percent and 8 per cent respectively. How much does the Lasyeyres price index increase by between period0and period 1?
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27.
In a perfectly competitive industry, the long-run demand curve is given by p= 1000q; the long run average cost function for the representative firm is given by (q 4)2 + 40. How many identical firms can exist in this industry? Explain. (q : quantity sold by a firm, p : price)
28.
Suppose we say that an allocation x is Pareto optimal if and only if there does not exist an allocation, say y, such that : every individual is the economy considers y to be at least as good as x, and at least one individual considers y to be strictly better than x. Now, consider a society of four individuals. This society has five allocations to choose from a, b, c, d and e. Individual preferences over these allocations are as follows: Ist individual : 2nd individual : 3rd individual : 4th individual : aP1 bP1 cP1 dP1 e bP2 cP2 dP2 eP2 a cP3 dP3 eP3 aP3 b dP4 eP4 aP4 bP4 c
aP1 bP1 cP1 dP1 e means that the Ist individual prefers allocation a over b, b over c , d over e. Likewise for the reference of other individuals. Find out the Pareto optimal allocations for this society. Explain your answer.
29.
There are 100 competitive firms in an industry, each with a short-run cost curve C(q) = q2 + 4q + K, where K is a positive constant. The industry demand curve is q = 100- 10p. Find the short-run equilibrium for this industry. What limit must K satisfy for the firms to survive, all other things remaining the same? (q : quantity sold by a firm, p : price)
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30.
Consider a gambling game where you have to throw two dice simultaneously. You would gain Rs. 2 for any even number that show up, and lose Re 1 for any odd number that shows up. What is your expected gain or loss from the game? Consider an economy where of the total income (output) is distributed to the workers and the other half is distributed to the capitalists. The capitalists save 50% of their income and consume the rest, the workers save 25% of their income and consume the rest. The aggregate demand consists of total consumption demand and total investment demand which is autonomous. Output is demand determined. (a) (b) What is the equilibrium level of income in the economy if the investment demand is equal to 100? How does the equilibrium value change if of the total income is distributed to the workers and to the capitalists? Can you economically explain the result?
31.
32.
Explain the difference between direct and indirect taxes, with 2 examples of each.
PART C
33.
Write an essay on any one of the following topics: (a) (b) (c) (d) (e) The need for a universal employment guarantee scheme in rural India. Business process outsourcing. Why Indias foreign exchange reserves are increasing Utility Possibility Curves. The new patents regime in India.
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(f)
Competitive markets and optimality. **********FINISHED***************
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JNU Entrance Examination Papers JNU Entrance Exam www.ecopoint.

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With free trade, the US will not produce any wheat.

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Includes flows of investment but not the balance on investment income.

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Will turn a trade deficit into a balance.

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(a) (b) (c) (d)

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(a) (b) (c) (d)

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Strictly concave to the origin Straight lines L-shaped.

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There is no fixed relationship between Arithmetic Mean and Geometric Mean

If (x/b) > (b/c), then (a) (b) xc > b2 xc < b2

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xc = b2 Cannot say anything about relation between x, b and c

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(b) (c) (d)

87 77 None of the above.

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(a) (b) (c) (d)

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The rate of interest is (a) A flow variable.

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(b) (c) (d)

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