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General Instructions:
(i) All questions in both sections are compulsory. However, there is internal choice in some questions.
(ii) Marks for questions are indicated against each question.
(iii) Question No.1-3 and 15-19 are very short answer questions carrying 1 mark each. They are required to be answered in one sentence.
(iv) Question No.4-8 and 20-22 are short answer questions carrying 3 marks each. Answers to them should not normally exceed 60 words each.
(v) Question No.9-10 and 23-25 are also short answer questions carrying 4 marks each. Answers to them should not normally exceed 70 words each.
(vi) Question No.11-14 and 26-29 are long answer questions carrying 6 marks each. Answers to them should not normally exceed 100 words each.
(vii) Answers should be brief and to the point and the above word limit be adhered to as far as possible.
Question 1
• Q1

If with the rise in price of good Y, demand for good X rises, the two goods are : (Choose the correct alternative)
(a) Substitutes
(b) Complements
(c) Not related
(d) Jointly demanded

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• Q2

A consumer consumes only two goods. If price of one of the goods falls, the indifference curve : (Choose the correct alternative)
(a) Shifts upwards
(b) Shifts downwards
(c) Can shift both upwards or downwards
(d) Does not shift

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• Q3

What is 'ordinal' utility?

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• Q4

What will be the impact of "Education for All campaign" (Sarv Shiksha Abhiyan) on the Production Possibilities Curve of the Indian economy and why ?

OR

What will likely be the impact of large scale inflow of foreign capital in India on Production Possibilities Curve and why ?

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• Q5

Explain the cause of limited number of firms in an oligopoly market.

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• Q6

What is maximum price ceiling ? On what type of goods is it normally imposed ? Use diagram.

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• Q7

Why is minus sign attached to the measure of price elasticity of demand of a normal good in comparison to the plus sign attached to the measure of price elasticity of supply ? Explain.

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• Q8

Giving reason, comment on the shape of Production Possibilities Curve based on the following table :

 Good X (units) Good Y (units) 0 10 1 9 2 7 3 4 4 0

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• Q9

A consumer spends Rs 60 on a good priced at Rs 1 per unit. When the price rises by 100 percent, he continues to spend Rs 60 on the good. Calculate the price elasticity of demand by percentage method.

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• Q10

What is supply ? Explain the effect of technological progress on supply of a good.

OR

What is 'change in supply' ? Explain the effect of tax imposed on a good on the supply of the good.

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• Q11

What are the different phases in the Law of Variable Proportions in terms of Total Product ? Give reasons behind each phase. Use diagram.

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• Q12

Market for a good is in equilibrium. There is 'increase' in demand for the good. Explain the chain of effects of this change.

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• Q13

A consumer consumes only two goods, each priced at Rupee one per unit. If the consumer chooses a combination of the two goods with Marginal Rate of Substitution equal to 2, is the consumer in equilibrium ? Give reasons. Explain what will a rational consumer do in this situation.

OR

A consumer consumes only two goods X and Y whose prices are Rs 2 and Rs 1 per unit respectively. It the consumer chooses a combination of the two goods with marginal utility of X being 4 and that of Y also being 4, is the consumer in equilibrium ? Give reasons. Explain what will a rational consumer do in this situation. Use Marginal Utility Analysis.

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• Q14

Explain the rationale behind the conditions of equilibrium of a producer.

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• Q15

Other things remaining the same, when foreign currency becomes cheaper, the effect on national income is likely to be : (Choose the correct alternative)
(a) Positive
(b) Negative
(c) Positive and negative both
(d) No effect

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• Q16

Primary deficit in a government budget equals : (Choose the correct alternative)
(a) Interest payments
(b) Interest payments less borrowings
(c) Borrowings less interest payments
(d) None of the above

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• Q17

Which one of these is a revenue expenditure ?
(a) Purchase of shares
(c) Subsidies
(d) Expenditure on acquisition of land

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• Q18

Name any two components of 'aggregate demand'.

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• Q19

If MPC = 0, the value of multiplier is : (Choose the correct alternative)
(a) 0
(b) 1
(c) Between 0 and 1
(d) Infinity

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• Q20

Give the meanings of 'autonomous' transactions and 'accommodating' transactions in the Balance of Payments Accounts.

OR

Give the meanings of Balance of Trade and Balance on Current Account of Balance of Payments Accounts.

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• Q21

Giving reasons explain where charity to foreign countries is recorded in the Balance of Payments Accounts.

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• Q22

If the Real Gross Domestic Product is Rs 250 and the Price Index (base = 100) is 120, calculate the Nominal Gross Domestic Product.

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• Q23

Why do we say that commercial banks create money while we also say that the central bank has the sole right to issue currency ? Explain. What is the likely impact of money creation by the commercial banks on national income ?

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• Q24

An economy is in equilibrium. Calculate Autonomous Consumption from the following :

National Income = 1,250
Marginal Propensity to Save = 0.2
Investment Expenditure = 150

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• Q25

Explain 'Government's Bank' function of the central bank.

OR

Explain 'Bankers' Bank' function of the central bank.

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• Q26

What is 'inflationary gap' ? Explain the role of Cash Reserve Ratio in removing this gap.

OR

What is 'deficient demand' ? Explain the role of 'Margin Requirements' in removing this gap.

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• Q27

Explain the role of government budget in fighting inflationary and deflationary tendencies.

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• Q28

Giving reasons explain how should the following be treated in estimation of national income :
(i) Payment of corporate tax by a firm
(ii) Purchase of machinery by a factory for own use
(iii) Purchase of uniforms for nurses by a hospital

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• Q29

Calculate Net National Product at Market Price and Gross National Disposable Income :

 (Rs Crores) (i) Net factor income to abroad (–) 10 (ii) Net current transfers to abroad 5 (iii) Consumption of fixed capital 40 (iv) Compensation of employees 700 (v) Corporate tax 30 (vi) Undistributed profits 10 (vii) Interest 90 (viii) Rent 100 (ix) Dividends 20 (x) Net indirect tax 110 (xi) Social security contributions by employees 11

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