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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 due to fall in the price of good X, demand for good Y rises, the two goods are : (Choose the correct alternative)
(a) Substitutes
(b) Complements
(c) Not related
(d) Competitive

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• Q2

If Marginal Rate of Substitution is increasing throughout, the Indifference Curve will be : (Choose the correct alternative)
(a) Downward sloping convex
(b) Downward sloping concave
(c) Downward sloping straight line
(d) Upward sloping convex

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• Q3

Define Indifference Map.

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• Q4

What is likely to be the impact of "Make in India" appeal to the foreign investors by the Prime Minister of India, on the production possibilities frontier of India? Explain.

OR

What is likely to be the impact of efforts towards reducing unemployment on the production potential of the economy? Explain.

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• Q5

Distinguish between cooperative and non-cooperative oligopoly.

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• Q6

What are the effects of 'price-floor' (minimum price ceiling) on the market of a good? Use diagram.

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• Q7

Explain the significance of 'minus sign' attached to the measure of price elasticity of demand in case of a normal good, as compared to the 'plus sign' attached to the measure of price elasticity of supply.

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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 400 on a good priced at Rs 8 per unit. When its price rises by 25 percent, the consumer spends Rs 500 on the good. Calculate the price elasticity of demand by the Percentage method.

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• Q10

What is the behaviour of (a) Average Fixed Cost and (b) Average Variable Cost as more and more units of a good are produced ?

OR

Define Average Revenue. Show that Average Revenue and Price are same.

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• Q11

What are the different phases in the Law of Variable Proportions in terms of marginal product ? Give reason behind each phase. Use diagram.

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• Q12

Market for a good is in equilibrium. Demand for the good "increases". Explain the chain of effects of this change.

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• Q13

A consumer consumes only two goods X and Y, both priced at Rs. 2 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? Why or why not? What will a rational consumer do in this situation? Explain.

OR

A consumer consumes only two goods X and Y whose prices are Rs. 5 and Rs. 4 respectively. If the consumer chooses a combination of the two goods with marginal utility of X equal to 4 and that of Y equal to 5, is the consumer in equilibrium? Why or why not? What will a rational consumer do in this situation? Use utility analysis.

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• Q14

Explain why will a producer not be in equilibrium if the conditions of equilibrium are not met.

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• Q15

Other things remaining the same, when in a country the market price of foreign currency falls, national income is likely : (Choose the correct alternative)

(a) to rise
(b) to fall
(c) to rise or to fall
(d) to remain unaffected

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• Q16

Primary deficit in a government budget is : (Choose the correct alternative)

(a) Revenue expenditure − Revenue receipts
(b) Total expenditure − Total receipts
(c) Revenue deficit − Interest payments
(d) Fiscal deficit − Interest payments

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• Q17

Direct tax is called direct because it is collected directly from : (Choose the correct alternative)
(a) The producers on goods produced
(b) The sellers on goods sold
(d) The income earners

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• Q18

What is 'aggregate demand' in macroeconomics?

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• Q19

If MPC = 1, 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

What are fixed and flexible exchange rates ?

OR

Explain the meaning of Managed Floating Exchange Rate.

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• Q21

Where is 'borrowings from abroad' recorded in the Balance of Payments Accounts ? Give reasons.

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• Q22

If the Nominal GDP is Rs 600 and Price Index (base = 100) is 120, calculate the Real GDP.

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• Q23

Currency is issued by the central bank, yet we say that commercial banks create money. Explain. How is this money creation by commercial banks likely to affect the national income ? Explain

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• Q24

An economy is in equilibrium. Calculate the National Income from the following :

Autonomous Consumption = 120
Marginal Propensity to Save = 0.2
Investment Expenditure = 150

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• Q25

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

OR

Explain the "Bank of Issue function" of the central bank.

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• Q26

What is 'deficient demand' ? Explain the role of 'Bank Rate' in removing it.

OR

What is 'excess demand' ? Explain the role of 'Reverse Repo Rate' in removing it.

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• Q27

Explain how the government can use the budgetary policy in reducing inequalities in incomes.

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• Q28

Giving reason explain how the following should be treated in estimation of national income :
(i) Payment of interest by a firm to a bank
(ii) Payment of interest by a bank to an individual
(iii) Payment of interest by an individual to a bank

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• Q29

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

 (Rs. crores) (i) Private final consumption expenditure 400 (ii) Opening stock 10 (iii) Consumption of fixed capital 25 (iv) Imports 15 (v) Government final consumption expenditure 90 (vi) Net current transfers to rest of the word 5 (vii) Gross domestic fixed capital formation 80 (viii) Closing stock 20 (ix) Exports 10 (x) Net factor income to abroad (−) 5

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