CS (Main) Exam:2015
ECONOMICS (PAPER-I)

Answer the following questions in about 150 words each 10x5=50

1 Explain the backward sloping supply curve of labour as a choice between
income and leisure

Under perfect competition, in the short run, find out graphically, without using
average cost curve, the conditions in equilibrium for the existence of normal
profit, supernormal profit and loss.

State Okun’s law and find out the expectations-augmented Phillips curve.

“If the interest elasticity of demand for money is low, the monetarists could
predict the real GNP simply by the -use of money supply.” Explain this
statement.

Explain repo rate and reverse repo rate. How do changes in the repo rate affect
EMIs of borrowers?

2. In what way Kaldor’s model of income distribution is basically a Keynesian
theory?

Explain how Nash equilibrium provides a solution to the problem of strategic
interdependence among firms in an oligopolistic market.

How is Kaldor-Hicks compensation principle an improvement over Pareto
optimality criterion? What are Scitovsky’s views in this regard?

3. "Under rational expectations hypothesis, systematic monetary policy will be
ineffective.” Explain this statement using a suitable model.

Show that liquidity preference is neither necessary nor sufficient for the
existence of involuntary unemployment in Keynesian system.

Derive money multiplier when a part of money supply is exogenous and the
other part is endogenous.

4. In the event of persistent inflation in an economy, what changes the Central
Bank will bring about in reserve ratios, bank rate and open market
operations?

“Subsidies have both positive and negative impacts on the economy.” Explain
this statement and illustrate your answer with Indian experience.

Explain the meaning and significance of money illusion on the part of workers
in the Keynesian theory of employment.

5. Answer the following questions in about 150 words each 10x5=50

Do you think that the root of Harrod’s instability problem lies in the
assumption of wage-price rigidity? Give arguments in favour of your answer.

What is ‘immiserizing growth'? How can it be prevented through trade policy
interventions?

How does carbon trading help in reducing environmental degradation?

How do depreciation and appreciation in the external value of a currency
impact a country’s balance of payments?

“Balanced and unbalanced growth strategies are not substitutes but
complementary to each other.” Explain this statement.

6. In the context of a two-country model, derive foreign trade multiplier and
explain its working. What will be its repercussion?

Distinguish between Monetary union and Economic union. Do the proliferating
trading blocks adversely affect the free trade in the world? Give reasons for
your answer.

What are the advantages and disadvantages of capital mobility for developing
countries?

7 . “As long as the substitution possibilities between foreign and domestic
resources are limited, the dual-gap analysis is relevant.” Critically examine this
statement.

In an economy having two sectors, namely, goods-producing sector and
Research and Development sector, prove with the help of new growth
theory that both capital and aggregate output must grow at the same rate
and per capita output must grow at the rate of growth of technology.

What is indicative planning? In this context, explain how State and markets
can play a synergetic role in economic development.

8. What do you mean by ‘green accounting*? Discuss how this concept can be
incorporated in national income accounting.

Discuss the role of renewable energy resources in order to maintain
environmental sustainability with special reference to India.

“Global warming will certainly increase the cry of the earth and the cry
of the poor.* In this context, examine the international efforts to reduce
global warming.