Civil Services Exam 2024: Economics Paper-I

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Questions and Answers

What is the maximum number of questions a candidate must attempt in the examination?

Four questions

Seven questions

Six questions

Five questions (correct)

What will happen if a candidate writes answers in a medium not authorized in their Admission Certificate?

Their answers will be assessed

No marks will be awarded (correct)

They will receive partial marks

Their entire attempt will be dismissed

Which questions are compulsory in the examination?

Questions 5 and 6

Questions 1 and 4

Questions 1 and 5 (correct)

Questions 2 and 3

Which of the following statements about the question paper layout is true?

It includes both Hindi and English for all questions Signup and view all the answers

What is the maximum mark allocation for the Economics (Paper-I) examination?

250 marks Signup and view all the answers

What is required from candidates in terms of word limit for questions?

They must adhere to the specified word limit Signup and view all the answers

For which part of the question paper are Graphs/Illustrations necessary?

Wherever required as specified Signup and view all the answers

What should candidates do if they leave a page blank in the answer booklet?

It should be struck off clearly Signup and view all the answers

How many sections are the questions divided into?

Two Sections Signup and view all the answers

What happens to the answers that are attempted partly?

They are counted in sequential order Signup and view all the answers

What does the underemployment equilibrium concept show regarding labor utilization?

Resources are used inefficiently. Signup and view all the answers

In Keynes' approach, why is full employment not achieved automatically?

Savings may exceed investment. Signup and view all the answers

What is the aggregate saving function given in the information?

s = -40 + 0.5(YT) + 0.25r Signup and view all the answers

What happens to the equilibrium national income (Y) when money supply is increased by 20 crore?

It increases. Signup and view all the answers

What is a key critique of the classical theory of interest?

It assumes fixed savings rates. Signup and view all the answers

How do commercial banks create credit?

By receiving deposits and offering loans. Signup and view all the answers

What defines public goods compared to private goods?

Public goods are non-excludable and non-rivalrous. Signup and view all the answers

What is a limitation that can affect the multiplier effect?

High tax rates. Signup and view all the answers

What distinguishes Fisher's theory from the Cambridge cash balance approach?

Fisher focuses on transactional demand for money. Signup and view all the answers

What criticism do both Fisher's theory and Cambridge cash balance approach face?

They assume constant velocity of money. Signup and view all the answers

What differentiates the perceived demand curve from the proportional demand curve in a monopolistic competitive market?

The perceived demand curve shows a firm’s individual demand, while the proportional demand curve shows total market demand. Signup and view all the answers

What is a key reason why the proportional demand curve tends to be steeper than the perceived demand curve?

Consumers have less sensitivity to price changes for the proportional curve. Signup and view all the answers

Which of the following best describes the classical dichotomy phenomenon?

It separates real variables from nominal variables, claiming they do not affect one another. Signup and view all the answers

In the context of tax revenue generation, why is ad valorem tax preferred over specific sales tax from a firm's point of view?

Ad valorem tax is proportional to the selling price, adjusting with market changes. Signup and view all the answers

What role do treasury bills play in controlling money supply?

They are used to absorb excess liquidity from the market. Signup and view all the answers

Which of the following statements best describes Pareto optimality?

It occurs when no individual can be made better off without making someone else worse off. Signup and view all the answers

Which behavioral assumptions are central to the Marshallian approach to market stability?

Consumers and firms make decisions based on marginal analysis. Signup and view all the answers

What conflict arises between the Marshallian and Walrasian approaches when both demand and supply curves are positively sloped?

Their assumptions about consumer behavior become inconsistent. Signup and view all the answers

What is the main assumption of the Neoclassical Loanable Funds Theory of Interest?

The supply of loanable funds is influenced by the interest rate. Signup and view all the answers

What are the main components of the Human Development Index (HDI)?

Life expectancy at birth, education index, and income index Signup and view all the answers

What is one methodological limitation of the Human Development Index?

It does not account for income inequality within countries. Signup and view all the answers

According to Kuznets' inverted 'U' hypothesis, what relationship exists between economic growth and inequality?

Economic growth initially increases inequality, then decreases it. Signup and view all the answers

In the context of economic theories, what is the warranted rate of growth?

The desired growth rate based on economic models and investment patterns. Signup and view all the answers

How does Harrod's model illustrate the knife-edge instability problem?

By indicating that any deviation from the warranted rate leads to increasing divergence. Signup and view all the answers

Why might import substitution be favored over export promotion in developing countries?

It helps develop local industries by reducing dependency on imports. Signup and view all the answers

What is one advantage of export promotion strategy for developing countries?

It enhances foreign exchange earnings and creates jobs. Signup and view all the answers

Which of the following can be considered a major disadvantage of an import substitution strategy?

It may lead to trade imbalances and inefficiencies. Signup and view all the answers

What characterizes managed floating exchange rates?

Government intervenes to stabilize the currency. Signup and view all the answers

How does carbon trading contribute to reducing environmental degradation?

It facilitates investment in carbon-neutral technologies. Signup and view all the answers

Which statement reflects the impact of higher tariffs on employment?

Higher tariffs may redistribute low-income jobs. Signup and view all the answers

What is the role of offer curves in determining equilibrium terms of trade?

They represent the willingness to trade different quantities. Signup and view all the answers

What does the elasticity approach in balance of payments focus on?

How responsive demand is to changes in price. Signup and view all the answers

According to the Stolper-Samuelson theorem, free trade can lead to income inequalities in developing countries by affecting which factor?

The return on capital versus labor. Signup and view all the answers

How does surplus labor contribute to structural transformation in an economy according to Lewis's theory?

It allows capital to move from agriculture to industry. Signup and view all the answers

What are the main drawbacks of the public-private partnership (PPP) model?

Reduced accountability in project management. Signup and view all the answers

Which of the following strategies is often debated in developing countries for economic growth?

Import substitution versus export promotion. Signup and view all the answers

What factors generally affect the demand for foreign exchange?

Home demand for imports and supply of import goods. Signup and view all the answers

Study Notes

Civil Services (Main) Examination, 2024

The exam is for Civil Services (Main) Examination, 2024.
The subject is Economics (Paper-I).
The paper code is PHKM-U-ECO.
The duration of the exam is three hours.
The total marks are 250.

Instructions

There are eight questions divided into two sections.
Candidates must attempt five questions in all.
Question numbers 1 and 5 are compulsory.
Candidates must choose at least one question from each Section.
The marks for each question/part are given in the paper.
Answers must be written in the language authorized in the Admission Certificate.
The word limit specified in questions must be adhered to.
Graphs/illustrations can be drawn in the space provided for answering the question.
Attempts will be counted in sequential order.
Any blank page must be clearly struck off.

Section-A

Question 1

Each question must be answered in about 150 words.
(a) Differentiate between perceived demand curve and proportional demand curve in a monopolistic competitive market. Explain why the proportional demand curve is steeper than the perceived demand curve.
(b) Discuss critically the phenomenon of classical dichotomy.
(c) Show that ad valorem tax is preferable to specific sales tax from a firm's point of view in generating the same level of tax revenue.
(d) Examine the role of treasury bills in controlling money supply.
(e) Write down the major assumptions behind Neoclassical Loanable Funds Theory of Interest.

Question 2

(a) Derive Pareto optimality conditions in production in a two commodities-two factors-two producers framework. Show that Pareto optimality does not necessarily guarantee for equity.
(b) Write down the behavioural assumptions used in Marshallian and Walrasian approaches of market stability. Show that these two approaches become conflicting when both the demand and supply curves are positively sloped.
(c) Describe the short-run and long-run equilibrium of a firm under monopolistic competition.

Question 3

(a) Explain the concept of underemployment equilibrium with graphical illustration. Why full employment cannot be reached automatically in Keynes' approach? Analyze.
(b) Calculate the equilibrium national income (Y) and interest rate (r) by using an appropriate macroeconomic model from the information given below:
- Aggregate saving function: s = -40+0.5(YT) +0.25r
- Tax function: T=20+0.2Y
- Investment function : I = 20-0.25r
- Money demand function : L = 0.4Y-0.5r
- Aggregate money supply : M = 40 (rupees in crore)
- How will the equilibrium values change when money supply is increased by 20 crore?
(c) Critically analyze classical theory of interest.

Question 4

(a) Describe the mechanism of credit creation by commercial banks and its implications on multiplier effect. Analyze some of the limitations that can jeopardise the implications on multiplier effect.
(b) Distinguish between public goods and private goods. Explain how market failure occurs in the case of public goods.
(c) What is the difference between Fisher's theory and Cambridge cash balance approach to quantity theory of money? What is the criticism of each? Which one is more relevant in present context? Justify.

Section-B

Question 5

Each question must be answered in about 150 words.
(a) Critically examine 'per capita' GDP as a crude indicator of development.
(b) Explain managed floating and sterilized interventions for exchange rate.
(c) Discuss how carbon trading is helpful in reducing environmental degradation.
(d) "Higher tariffs do not increase employment, they just redistribute the unemployed." Do you agree with the statement? Explain.
(e) Explain how the equilibrium terms of trade are determined by using offer curves of the trading partners.

Question 6

(a) Discuss the elasticity approach and absorption approach for adjustments in balance of payments.
(b) By using Stolper-Samuelson theorem, discuss the possible effects of free trade on income inequalities in developing countries.
(c) Explain how the elasticity of demand for foreign exchange is influenced by the elasticity of home demand for imports and by the elasticity of home supply of import-competing goods.

Question 7

(a) Explain how the structural transformation, in the economy, takes place with surplus labour as per Lewis theory of economic development.
(b) What are the advantages and disadvantages of public-private partnership model for economic development? What are the key prerequisites for success of PPP model? Explain giving examples.
(c) Discuss the issues (pros and cons) in the debate over import substitution and export promotion strategy for developing countries. Which strategy would you favour and why? Explain.

Question 8

(a) Describe the major components used in Human Development Index (HDI) by the United Nations Development Programme (UNDP). Write down the methodological limitations of this index. Suggest appropriate method to eliminate these limitations.
(b) Discuss the inverted 'U' shaped hypothesis by Kuznets in describing the relationship between inequality and economic growth. How is this hypothesis useful for developing countries?
(c) Distinguish between warranted rate of growth and natural rate of growth. Explain how knife-edge instability problem occurs in Harrod's model of economic growth.

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Description

Prepare for the Civil Services (Main) Examination 2024 with a focus on Economics Paper-I. This quiz covers key concepts, question formats, and guidelines as specified in the official exam structure. Sharpen your knowledge and test your readiness for one of the crucial subjects in the civil services selection process.