IAS Mains Economics Paper 2009

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Section –A

Q. 1. Answer any three of the following. Each answer should not exceed 200 words:


  1. What, according to Arrow, are the axioms required for translating individual preference into social preferences? Why is it impossible to construct social preferences satisfying those axioms?

  2. “Subjective approach to taxation leads to least aggregate sacrifice principle.” Elucidate. Also give the limitations of this principle.

  3. What is high-powered or base money (H)? Is it an autonomous policy-determined variable? Explain.

  4. “Cambridge equation determines income (Y) assuming rate of interest (r) as given, whereas Keynes theory of interest rate determination assumes given income. Both are thus incomplete.”

    Do you agree with the above assertion? How would then these two variables (Y and r) be determined simultaneously?

Q. 2. Demand for light bulbs can be characterized by Q = 100 – P, where Q is millions of boxes of lights sold and P is the price per box. There are two producers of lights having identical cost functions:

  1. Unable to recognize the potential for collusion managers of the two firms act as short-run perfect competitors what are the equilibrium values of and P? What are each firm’s profits?

  2. Manager of each firm independently recognizes the oligopolistic nature of light bulbs industry and plays Cournot. What are the equilibrium values of and P? What are each firm’s profits?

  3. Suppose Firm I guesses correctly that Firm II has Cournot conjectural variation, so it plays Stackelberg. What are the equilibrium values of and P? What are each firm’s profits?

  4. If the managers of two firms collude, What are the equilibrium values of and P? What are each firm’s profits?


Q.3. Answer the following in not more than 200 words each:


  1. “A dominant firm acts as a price leader and other firms adjust their outputs accordingly.” Comment.

  2. “The direct money burden of the tax imposed on any object is divided between the buyers and the sellers in the proportion of the elasticity of supply of the object taxed to the elasticity of demand for it.” Discuss.

  3. What is “Scitovsky’s paradox”? How far has Scitovsky been successful in removing contradictions in Kaldor-Hicks compensation criteria of welfare?

Q. 4. “If expectations (regarding price level) were always fulfilled, short-run aggregate supply curve would always be vertical.”

Critically examine this statement of New Classical Economics. What would be the shape of the curve, if expectations were not realized? What other assumption is made by New Classical Economists in this context and what is its implication?

Section –A

Q. 5. Answer any three of the following. Each answer should not exceed 200 words:


  1. “If each country is endowed with a certain fixed commodity combination, the differences in demand patterns in these countries can lead to emergence if international trade.”

    Explain this statement with the help of offer curves of the two countries.

  2. Bring out the differences in the definitions of deficit financing given by different authorities in India and examine the role of deficit financing as an instrument of monetary control.

  3. “In the presence of domestic distortions, subsidies are the first best policies and tariffs are the second best.” Do you agree? Explain.

  4. Critically evaluate Kuznets inverted U-shaped curve hypothesis of imcome distribution. Does it hold good for less developed countries as well?

Q. 6. Do you subscribe to the view that in a small open economy with perfect capital mobility, expansionary fiscal policy is ineffective under freely flexible exchange rate, whereas expansionary monetary policy will increase the national income? Elaborate your answer using suitable diagrams.

Q. 7. “Expansion of high productivity sector absorbs more and more labour from subsistence sector indication that dualism is a powerful tool of development planning.”

Critically evaluate Lewis model of development in the light of the above statement and examine relevance of the model for contemporary India.

Q. 8. Answer the following, limiting your answer to about 200 words for each:


  1. Define a balance of payments function and explain the factors that cause a shift in his function. Explain the general equilibrium situation in a four-sector IS-LM model.

  2. Explain Milton Friedman’s reformulation of the Quantity Theory of Money.

  3. What is Human Development Index (HDI)? Give its limitations as a measure of economic development and suggest improvement(s).


Section –A

Q. 1. Answer the following, limiting your answer to about 200 words for each:


  1. Discuss the process of ‘forced commercialization’ of agriculture under colonial rule.

  2. Explain the main aspects of the role of the Reserve Bank of India under the present liberalized financial regime as compared to the regime prior to 1991.

  3. Critically examine the arguments usually put forward in favour of disinvestment of public sector enterprises.

  4. “The TRIPS agreement runs counter to the neoliberal argument in favour of competition.” Is this a fair assessment? Discuss.

Q. 2. Evaluate the track record of land reform in India in its various aspects, bringing out inter-state differences. How would you interpret this record ?

Q. 3. Provide an analytical description of growth and change in the Indian economy during the period from 1950-51 to 1966-67.

Q. 4. Carefully examine and analyse the argument that over the last two decades there is an increasing divergence between the incidence of poverty based on the Planning Commission’s Expert Committee methodology and that based on calorie intakes as obtained from the National Sample Surveys.

Section –B

Q. 5. Answer the following, limiting your answer to about 200 words for each:


  1. “The success of the Green Revolution shows the importance of the State in agrarian transformation.” Comment.

  2. Critically assess the key recommendations of the Twelfth Finance Commission.

  3. What do you think has been the impact of the targeted public distribution system in India on food security for the rural poor? Justify your answer.

  4. Examine the role of Foreign Direct Investment in the Indian economy empirically.

Q. 6. Examine critically the Economic Reforms underway since 1991 with reference to their effect on inequality, poverty reduction and vulnerability to external shocks.

Q. 7. Explore the nature of tax reforms India needs to ensure “inclusive growth”, spelling out their basic components as you see them.

Q. 8. What are you perceptions on the following? (Each answer in about 200 words):


  1. The slowing down of industrial growth in India from the mid 1960s till the mid/late 1970s.

  2. Whether public and private investments in India are complementary or competing?

  3. The role of small scale and cottage industries in the present context of the Indian economy.

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