Economics Most Important Questions Part 2 For 2020 Exam

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  1. Examine the relation between own and cross pried elasticity for a compensated demand function (2014 – 10 marks)

  2. What do you mean by the existence and uniqueness of equilibrium in a market? Examine these concepts in a market where both demand and supply curves are downward sloping. (2014- 10 marks)

  3. 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. (2014 – 20 marks)

  4. Write out the conditions for Walrasian equilibrium in a pure exchange economy with no production, and two different goods. The economy is populated by two people A and B. Show that for such an economy for any equilibrium set of prices; the absolute price level is indeterminate. (2013 – 10 marks)

  5. Derive the equilibrium conditions of an individual firm and of the industry in a monopolistic competition scenario? (2013 – 10 marks)

  6. What is the market equilibrium price and quantity when each firm behaves as a Cournot duopolist? What are the firms’ profits?

  7. What is the market equilibrium price and quantity when each firm behaves as a Bertrand duopolist? What are the firms’ profits? (2013 – 25 marks)

  8. If workers supply labour on the basis of an expected real wage, how is the aggregate supply of output determined in the economy? Suppose aggregate demand and supplies are below the natural rate of employment and output. Would the New Classical economists advocate any particular policy intervention in this situation?

  9. Differentiate between the complete, partial and zero crowding out effect of a given increase in government expenditure in an economy. (2014- 10 marks)

  10. Explain the paradox of thrift. (2014 – 10 marks)

  11. “Monetarists are of the view that only money matters and Keynesian believe that money does not matter at all.” What is the reasoning behind these extreme views held by their protagonists? (2014 – 20 marks)

  12. Should the government impose a unit tax or an ad valorem tax if the objective is that they should both impose the same burden at the initial price before the imposition of the tax, given a certain yield of tax is to be obtained? Demonstrate your answer with a diagram. (2013 – 25 marks)

  13. What is an offer curve? Draw two offer curves such that the offer curve of the home country has a section reflecting inelastic import demand and the foreign country’s offer curve is elastic throughout. Indicate in the diagram which portion of the home country’s offer curve is inelastic. What is the reason for this shape of the offer curve? Demonstrate the implications on trade of a tariff imposed on imports by the home country. (2013 – 10 marks)

  14. Will mutually beneficial trade be possible for the two nations? If yes, explain whether specialization shall be complete or not. (2014 – 10 marks)

  15. What are the two key conclusions of the Heckscher-Ohlin model of international? Under what assumptions are these conclusions arrived at? (2013 – 15 marks)

  16. Why is it that in a pure flexible exchange rate system, foreign exchange market has no direct effects on the monetary base and money supply? Does this mean that the foreign exchange market has no effect on the monetary policy? (2014 – 20 marks)

  17. Suppose the goods, financial, current account and foreign exchange markets are initially in equilibrium. The economy has low or imperfect capital mobility and operates at a fixed exchange rate. The economy is subject to a favorable demand shock that raises expenditure. What is the outcome of the shock on the aggregate income and interest rate in the short-run? How is the balance of payments equilibrium achieved? Draw a diagram in support of your answer. (2013 – 25 marks)

  18. Point out the critical elements in typical PPP agreements in infrastructure projects to safeguard the interests of the public.

  19. What is ‘liquidity trap’? How does it occur? Illustrate. (2011 – 20 marks)

  20. “Validity of Marshall’s equi-marginal utility depends on the assumption of unitary elasticity of the marginal utility curves of the commodities under the budget.” Clearly explain this assertion. (2012 – 12 marks)

  21. What do you mean by money multiplier? What are the factors that determine the value of the multiplier? (2012 – 20 marks)

  22. Why does the point of intersection of IS and LM carves coincide with two markets? (2012 – 20 marks)

  23. What are the fiscal and monetary implications of vertical IS and vertical LM curves? (2012 – 20 marks)

  24. Would the introduction of automatic teller machines, which allows people to withdraw cash from banks as needed, make deposits more inconvenient and affect the money supply Elucidate. (2011 – 20 marks)

  25. Explain why money supply remains unaffected if budget deficit is met by borrowing from the public. (2012 – 20 marks)

  26. What is an offer curve? Draw two offer curves such that the offer curve of the home country has a section reflecting inelastic import demand and the foreign country’s offer curve is elastic throughout. Indicate in the diagram which portion of the home country’s offer curve is inelastic. What is the reason for this shape of the offer curve? Demonstrate the implications on trade of a tariff imposed on imports by the home country. (2013 – 10 marks)

  27. What do you understand by a small open economy in the context of both goods and money markets? (2014 – 10 marks)

  28. What is meant by factor abundance? How does it affect the shape of the production frontier of a nation? (2014 – 10 marks)

  29. Analyze the partial equilibrium effects of a tariff imposed by a large country on its imports in terms of consumers’ surplus (2014 – 10 marks)

  30. “With the Doha Round of multilateral trade talks stalled, regional trade agreements (RTAs) have emerged as an alternative approach to increase trade, spur stronger economic growth and lower unemployment rates in the participating countries.” Explain (2014 – 20 marks)

  31. Explain the conditions under which complete specialization will be possible for two nations in case of comparative advantage.

Suppose productivity per unit of labour for two antions, India and UK, is given as under:

India UK

Wheat (kg/man hour) 06 03

Cloth (yard/man hour) 04 02

Will mutually beneficial trade be possible for the two nations? If yes, explain whether specialization shall be complete or not. (2014 – 10 marks)

  1. What are the two key conclusions of the Heckscher-Ohlin model of international? Under what assumptions are these conclusions arrived at? (2013 – 15 marks)

  2. Why is it that in a pure flexible exchange rate system, foreign xchange market has no direct effects on the monetary base and money supply? Does this mean that the foreign exchange market has no effect on the monetary policy? (2014 – 20 marks)

  3. 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. (2014 – 20 marks)

  4. “Apart from bringing capital into a country, MNCs provide many other advantages that cannot be obtained by borrowing from international capital markets.” Discuss. (2014 – 20 marks)

  5. Explain the Trade Related Investment Measures (TRIMs) of World Trade Organization (WTO). What are the major debates relating to it? (2014 – 10 marks)

  6. How do the small trading nations share the gains from trade which occur as a consequence of gains from exchange and gains from specialization? (2011 – 20 marks)

  7. If all assumptions hold true, how does trade between nations tend to bring about equalization of factor prices? (2011 – 20 marks)

  8. How does portfolio balance approach differ from monetary approach in determining the exchange rate? (2011 – 20 marks)

  9. How does the policy mix of fiscal and monetary policies maintain equilibrium in balance Of payments and full employment?

  10. In the contemporary world of perfect capital mobility and fixed exchange rates, why is the monetary policy ineffective to maintain equilibrium?

  11. What are India’s gains under WTO regime with respect to

    1. Service sector,

    2. Globe-Hex model

  12. How is subsidy better than tariff to achieve domestic objectives?

  13. “For most developing nations fighting persistent balance of payments crisis and inflationary crisis, monetary contraction is a better option.” Do you agree?

  14. Why are trading blocs formed? Explain the welfare impact of such trading blocks for non-member countries

  15. Distinguish between Currency Board Arrangement and dollarization. Why would a nation adopt one or the other?

  16. Can Kuznets’ hypothesis of inverted-U shaped curve be extended to environmental degradation? Explain

  17. Expand on the following three explanations for the Kuznets hypothesis about inequality and development – i) cohort size hypothesis ii) effect of openness on inequality iii) strong versus weak version of the hypothesis.

  18. Point out the critical elements in typical PPP agreements in infrastructure projects to safeguard the interests of the public.

  19. Explain the Lewis model of structural change from an agricultural economy to a modern industrial economy. State three major criticisms of the Lewis model.

  20. Explain the Harrod Domar Model and the reason for the knife edge equilibrium of growth in the long run.

  21. 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 in others or promoting import substitution.

  22. Our development strategy has been proposed in terms of ‘faster’, ‘more inclusive’ and ‘sustainable’ growth. Do the three components sit together well? Argue for your answer.

  23. Describe the different indicators that are used by UNDP to construct the HDI. Why is a logarithmic transformation applied only to per capita income in calculation of HDI?

  24. State five reasons that support government intervention in agricultural markets.

  25. What do the following terms signify in structural transformation and growth ?

    1. Kuznets’ U-shaped curve

    2. Environmental Kuznets curve

    3. N-shaped Kuznets curve in the long-run

  26. How can the structural independence between A-sector and K-sector in the dualistic economy foster growth in the absence of external stimuli? (2011 – 20 marks)

  27. Compare Human Development Index (HDI) with Human Poverty Index (HPI) as a measure of development. How is the Human Poverty Index different from the Happy Planet Index?

  28. Why do energy elasticities tend to unity in industrially advanced countries?

  29. What are the negative externalities of high energy coefficients?

  30. How is warranted growth different from natural rate of growth? Explain why Harrod’s growth model is called knife-edge’.

  31. How does Solow incorporate investment in education in the growth model to achieve long-run growth?

  32. What are the objectives of National Environment Policy, 2006?

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