CS MAINS 2014 ECONOMICS Paper I

SECTION A

Ql. Answer the following in about 150 words each: 10x5=50
Examine the relationship between own and cross price elasticities for a compensated demandfunction. 10

Explain H-theory ofmoney supply. 10

Differentiate between the complete, partial and zero crowding out effect ora giveninctease in government expenditure in an economy. 10

What do you mean by existencean.d uniqueness of equilibrium in a market? Examine these concepts in a market where both demand and supply curves are downward sloping. 10

Explain the paradox of thrift. 10

Q2.(a) Discuss the cobweb model of dynamic equilibrium with lagged adjustment. Explain how the existence of a stable equilibrium depends on the nature of the demand and supply curves. 20

Monetarists are of the view that only money matters and Keynesians believe that money does not matter at all." What is the reasoiring.behind these extreme vi,ews held by their protagonists? 20

What do you understand by shifting of a tax How does a monopolist succeed in shifting the burden of a tax under increasing marginal cost? 10

Q3. Explain with appropriate assumptions,the determination of equilibrium income arid mterest rate in a Keynesian· model of goods and money markets, through diagrams. 20

Examine the process of reaching the Ricardian steady state. How can the tendency towards steady state be countered 20

(c)"The conventioal analysis of profit maximisation breaks down if the entrepreneur sells his output and possesses a production function which is homogenous of degree one." Explain. 10

Q4. Compare the deposit multiplier With money multiplier. Is there any impact oil money multiplier arising out of massive use of credit and debit cards . 20

(b).Compare the various instrnments of monetary policy with respect to influencing the cost and availability of credit. .. 20
Discuss the classical dichotomy that money is neutral.

SECTIONB

Q5. Answer the following in about 150 words each 10x5=50 .

What is by 'factor abundance' How does it affect the shape of the production frontier of a nation? 10

Can Kuznets' hypothesis' of inverted-U curve be extended to environmental degradation? Explain. 10

What do you understand by a small open economy in the context of both goods md money markets? . 10

Point out the .critical in typical Public-Private-Partnership agreements in the infrastructure projeCts' to safeguard the interests of the public. 10

Analyse the partial equilibrium effects of a tariff imposed by a large country on its imports in terms of consumers surplus. 10

Q6. "With the Doha Round of multilateral trade talks stalled, regional trade agreements (RTAS) have emerged as an alternative approach to increase trade, spur stronger econoIilic growth and lower unemployment rates in the partidpating countries." Explain. 20

"Balanced growth strategy of development in terms of pattern of investment has to be in conformitY not only with derived demands but final demands as well." Argue whether this statement is about avoiding bottlenecks for certain' sectors and, excess capacities mothers or promoting import substitution. 20

Explain the conditions under whiCh complete, specialisation will be possible for two nations in case of comparative advaniage. Suppose productivity per unit of labour for two nations, India and UK, is given as under:
India UK
Wheat (kg)/manhour 06 03
Cloth (yard)manhour 04 02
Will mutually beneficial trade be possible for the two nations If yes explain whether specialisation shall be complete or not. 10

Q7. Why is it that in a pure flexible exchange rate system, foreign exchange market has no direct effects on the monetary base and money suppiy Does this mean that the foreign exchange market has no effect on the monetary policy? 20

Distinguish between single and double factor terms of trade. Explain how far terms of trade of a developing economy would change with technological advancement and economic growth. 20

Our development strategy has been proposed iIi terms of 'more inclusive' and 'sustainable' growth. Do the three components sit together well? Argue for your answer. 10

Q8. Describe the different indicators that are used by UNDP to construct the Human Development In.dex (HDI). Why is a logarithmic transformation applied oIilyto per capitainoome in the cakulaiion ofHDI? 20

"Apart from bringing capital into a country multinational corporations, provide many other advantages that cannot he obtained' by borrowing from internation capital market." Discuss. 20

Explain the Trade Related Investment Measures (TRIMs) of World Trade Organisation (WTO). What are the major debates relating to it? 10