# IAS Mains Economics Paper 2010

## Section –A

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

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

i. 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

ii. for determining profit maximizing price and quantity of a monopolist, supply curve is not necessary.

Explain (i) and (ii) above with graphical illustration.

(b) State and explain the theory of distribution in which the exhaustion or 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.

(c) "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.

Q. 2. Answer any three of the following. Each answer should not exceed 200 words:

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(a) Why does the point of intersection of IS and LM curves coincide with the equilibrium of two markets?

(b) What are the fiscal and monetary implications of vertical IS and vertical LM curves ?

(c) State and explain the Law ofEqui-marginal Utility and also state clearly the limitations of this law.

Q. 3.

(a) What are the different measures of money supply ? Explain the concept of money multiplier and state the factors that determine its volume.

(b) Does the Heckscher- Ohlin theorem withstand the factor intensity reversal test? In this context, state the relevance of Leontief Paradox.

Q. 4.

(a) 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 30 of interest in determination of equilibrium income.

(b) 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.

## Section –B

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

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(a) "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.

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

(c) If public expenditure IS financed by money creation, show diagrammatically the short run and long run crowding out effect.

Q. 6.

(a) Show that in an open economy, g:tven full capital mobility, fiscal action has maximum effect under fixed exchange rate and monetary action has similar effect under flexible exchange rate.

(b) "New classical macro-econom1cs not only rejects the demand management policies of Keynes, but also the propositions of mainstream monetarists 40 such as Friedman." Do you agree?

Q. 7.

(a) Describe the structure of WTO with reference to five main agreements.

(b) What do you understand by 'sterilisation' effects of foreign exchange market intervention ? How does 'sterilisation' work in the case of imperfect capital 30 mobility ?

Q. 8. Develop the idea that endogenous technological progress, driven by investment in human capital formation and R & D, offsets diminishing returns to physical capital.

# IAS Mains Economics Paper 2010 ~ IAS Mains Economics Paper 2010

## Section –A

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(a) Discuss the contributions of D.R. Gadgil to Indian Economic Planning and Policy. Evaluate the key elements of the 'Gadgil Formula' used by the Planning Commission.

(b) Bring out the role of State Finance Commissions in India, with particular reference to the rural economy.

(c) Compare and contrast the 'Swadeshi' of 1905 and the 'Swadeshi' promoted later by Mahatma Gandhi.

Q. 2.

(a) Gunder Frank held that development of one part of the world causes underdevelopment of another part. Does it explain industrialisation of Britain and the de-industrialisation of India during the British Raj ? Assess.

(b) Is Gunder Frank's above vww still valid in the contemporary world ? Substantiate your answer.

(c) What were the shortages faced by the manufacturing sector in India at the dawn of Independence ?

Q. 3.

(a) “It was needless export pessimism that led India to adopt import substitution strategy of industrialisation m the pre-liberalisation period." Critically examine.

(b) In a supply constrained economy, how was it argued in India in the 1950s that deficit financing would help raise the growth rate ? In hindsight, analyse the validity of this view.

Q. 4. Discuss the poverty trends - both rural and urban, between 1973- 74 and 2004- 05 across States in terms of pace of reduction and concentration and relate them with changes in growth rates between the pre- and the post-liberalisation periods.

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(a) Critically assess the Tendulkar Committee's approach to measuring poverty in India.

(b) Delineate the role of the District Planning Committee.

(c) What are the implications in the replacement of the Prime Lending Rate System by the Base Rate System recently ?

(d) What are the four modes of GATS? What mode has been preferred by India and why ?

Q. 6.

(a) "Declining Pubbc Expenditure in agriculture is largely responsible for deceleration of growth in this sector in India." Critically examine the validity of this statement.

(b) "India has of late been over-tertiarized." Do you agree ? Substantiate your answer.

(c) Recent trends shpw that poverty incidence in urban areas is higher than its rural counterpart in more prosperous states. What factors, do you think, explain this ?

Q. 7.

(a) Critically examme the fiscal federal system as it operates in India presently. What improvements would you suggest ?

(b) Assess the degree of success of the targeted Public Distribution System in the country in meeting its objectives.

Q. 8.

(a) Bring out the broad changes 1n the level, composition and direction of Indian exports and imports since liberalisation in India.

(b) Examine the key elements of the Swarnajayanti Gram Swarozgar Yojana (SGSY). What are the major problems in its implementation?

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