civils mains ECONOMICS Paper I EXAM, 2010
T/me Allowed Three Hoursj i Maximum Marks 300'
INSTRUCTIONS
Each question is printed both in Hindi and
in English.
Answers must be written in the medium
speci?ed in the Admission Certi?cate issued
to you, which must be stated clearly on the
cover of the answer-book in the space
provided for the purpose. No marks will be
given for the answers written in a medium
other than that specified in the Adrnission.
Certificate
Candidates should attempt Questions No. 1
and 5 which are compulsory, and any three
of the remaining questions selecting at least
one question from each Section. .
The number of marks carried by each
question is indicated at the end of the
question. ‘





SECTION A

1. Answer the following questions. Each answer should
not exceed 200 words. 20x3=60


A supply curve is not used to determine the equilibrium price and quantity in a market under monopoly because

a supply curve derived by using relevant cost curves in a market under monopoly may give more than one price for different quantities and also more than one quantity for the same price; and

for determining profit maximizing price and quantity of a monopolist, supply curve is not necessary. Explain and above with graphical illustration.

State and explain the theory of distribution in which the exhaustion of the total product is taken care of without leaving any residual claimant and also state clearly the assumptions necessary for the success of the theory.
“Pareto-optimality is a necessary but not sufficient condition for welfare maximization.” Develop this idea highlighting the role of‘social welfare contours’ and ‘utility possibility contours’ in welfare maximizing state.

2. Answer the following in not more than 200 words for
each 20x3=60

Why does the point of intersection of IS and LM curves coincide with the equilibrium of two markets

What are the fiscal and monetary implications of vertical IS and vertical LM curves

State and explain the Law of Equi-marginal Utility and also state clearly the limitations of this law.

3. What are the different measures of money supply Explain the concept of money multiplier and state the factors that determine its volume. 30

Does the Heckscher — Ohlin theorem withstand the factor intensity reversal test In this context, state the relevance of Leontief Paradox. 30

4. In Keynesian theory “rate of interest is what it is because it is expected to become other than it is. If it is not expected to become other than it is, there is nothing to tell us why it is what it is.” Critically evaluate this comment and explain the role of‘ rate of interest in determination of equilibrium income. 40

What are the ways in which a perfectly competitive market may become imperfect Examine whether advertisement helps an imperfectly competitive market become a perfectly competitive one. 20

SECTION B

5. Answer the following questions. Each answer should
not exceed 200 words. 20x3=60

"There is one saving rate that is best in the sense of maximizing per capita consumption in steady state.” Explain this statement and illustrate the idea graphically.

Is the speculative demand for money responsible for the existence of involuntary unemployment in Keynesian system Give reasons.

If public expenditure is financed by money creation, show diagrammatically the short run and long run crowding out effect.

6. Show that in an open economy, given full capital mobility,fiscal action has maximum effect under fixed exchange rate and monetary action has similar effect under flexible exchange rate. 40

(b)“New classical macro-economics not only rejects the demand management policies of Keynes, but also the propositions of mainstream monetarists such as Friedman.” Do you agree 20


7. Describe the structure of WTO with reference to five main agreements. 30

What do you understand by ‘sterilisation’ effects of foreign exchange market intervention How does ‘sterilisation’ work in the case of imperfect capital mobility 30

8. Develop the idea that endogenous technological proress, driven by investment in human capital formation and offsets dirninishing returns to physical capital. 60