34 Registration No. : [Question paPcR assay sass SERIES CODE ‘conte sf Bna A Name of Candidate: Signature of Tavigilator ENTRANCE EXAMINATION, 2016 M.Phil. /Ph.D, ECONOMIC STUDIES AND PLANNING [ Field of Study Code : ECOP (136) } Time Allowed : 3 hours Maximum Marks : 70 INSTRUCTIONS FOR CANDIDATES Candidates must read carefully the following instructions before attempting the Question Paper : () Write your Name and Registration Number in the space provided for the purpose on the top of this ‘Question Paper and in the Answer Sheet. (il) Please darken the appropriate Circle of Question Paper Series Code on the Answer Sheet. (ii) AM questions are compulsory. (iv) The question paper has two Parts : A and B, Part—A has 20 questions of 1 mark each, Part—B has 25 questions of 2 marks each. (0) Answer all the 45 questions in the Answer Sheet provided for the purpose by darkening the correct choice, i.e, (a) or (b) oF (c) oF (d) with BALLPOINT PEN only against the corresponding circle. Any overwriting or alteration will be treated as a wrong answer. ‘hi] There will be negative marking. For each wrong answer, ¥. mark would be deducted for 1 marie questions and % mark would be deducted for 2 mark questions. (vi) Answers written by the candidates inside the Question Paper will not be evaluated. (wii) Pages at dhe end have beén provided for Rough Work. (Gx) Retum the Question Paper and Answer Sheet to the Invigilator at the end of the Entrance Exemination. DO NOT FOLD THE ANSWER SHEET. INSTRUCTIONS FOR MARKING ANSWERS 1. Use only Blue/Bleck Ballpoint Pen (do not use pencil) to darken the appropriate Circle 2. Please darken the whole Circle. 3. Darken ONLY ONE: CIRCLE for each question as shown in example below : Wrong Wrong Wrong Wrong Correct OH OO|FHOO|FHOBlOHOS|OHOO Once marked, no change in the answer is allowed. Please do not make any stray marks on the Answer Sheet Do rough work only on the pages provided for this purpose. ‘Mark your answer only in the appropriate space against the number corresponding to the question. Ensure that you have darkened the appropriate Circle of Question Paper Series Code on the ‘Answer Sheet. BoABAAnswer Question Nos. 1 to & based on the following information PART—A Each question carries 1 mark Union Budget (2015-16) at a Glance (as % of GDP) Heads, 2016-2017 (BB) 1, | Revenue Receipts O14 2. | Tax Revenue (Net to Centre) 7-00 3. | Non-tax Revenue 214 4, | Capital Receipts 399 5. | Recoveries of Loans 0.07 6, | Other Receipts 038 7, | Borrowings and Other Liabilities 354 8, | Total Receipts 13:13 9, | Non-plan Expenditure 0-48, To. | On Revenue Account 881 of which, 11, | Interest Payments 327, 12, | On Capital Account : 067 13, [Plan Expenditure 365 14, [Plan expd. on Revenue Account 268 18, [Plan expd. on Capital Account 097 16, | Total Expenditure A 17. [Revenue Expenditure 11-49) 18, | Of which, Grants for creation of capital assets iu 19, | Capital Expenditure 164 20. | Revenue Deficit B 21, | Bifective Revenue Deficit c 22. | Fiscal Deficit D 23, [Primary Deficit E Source : Budget at a Glance from Union Budget 2015-16 www.indiabudget.nic.in 1. Ais equal to (@) {b) fe} (a) B4A 16-4% 29:5% 99% 131% [P.T.O.2. Bis equal to (a) -09% 4% (56% (@) 23% 3. C is equal to (@) -2% () 29% (45% (a) 12% 4. Dis equal to fa) 0.0% ) 04% (35% @ 40% 5. Eis equal to fa) -20% () 24% () 09% (a) 03% 134-4BoA According to Pasinetti, in an economy with two social classes, a class of pure profit earners (capitalists) and a class of wage eamers (workers), both with constant but different average propensities to save out of their current incomes, the rate of profit along a balanced growth path with full employment will depend on {a) the workers" propensity to save (b) the capitalists’ propensity to save {) the propensities to save of both classes (4) the incremental capital-output ratio Durbin-Watson statistics tells us whether there is a problem of (a) serial correlation (b) mutticolinearity i: {c) _heteroskedasticity {d) None of the above Which of the following is a test for stationarity? (a) Breusch-Pagan test () Dickey-Puller test () Hausman test {@) None of the above 5 [P.T.0.With a rise in the real interest rate, the velocity of circulation of money is likely to (a) increase (b) decrease (9 remain unaffected (a) can't say 10. If there is a problem of serial correlation in time series regression, the standard error is likely to be (@) overestimated (b) underestimated {) not related (@) none of the above 11. If there is a problem of serial correlation in time series regression, the R? is likely to be (a) overestimated (b) underestimated (c) not related (a) can't say BeA 612. 13. 14, 134-4 Which of the following is not captured by strategic trade theory? (a) An imperfectly competitive market {b) Use of subsidies and other incentives by national governments () There are many players in the market (@) Governments use trade policy instruments to shift the rents in favour of domestic firms From the viewpoint of a country trying to further its development objectives, which of these forms of foreign inflows is the least desirable? (a) Foreign direct investment () Foreign loans (c) Assistance provided by other governments (a) Funds flowing into the country's stock market Which of these areas are not monitored by the World Trade Organization? (a) Harmonization of product and process standards {b) Rules for the grant of patents (c) Monitoring the impact of exchange rates on trade (@) Subsidies granted to farmers 7 {P.T0.1s. Tier 1 capital under Basel capital adequacy norms of a bank is la) tb) (a (a) equity capital and published reserves all forms of debt all assets shown in the balance sheet all assets, excluding ‘the identified non-performing assets Answer Question Nos. 16 and 17 based on the following information : Let X= (a, b,j and D=2¥ - (9) ie., collection of all non-empty sets of X. Let C: D-+2* = ( such that C(9.¢ S; ¥ Se D, is the choice function. 16. 17. 34-4 For Se Dand a be S:ae Cl + be C9 For Se D and bce S: be C(I 4 ce CIS For Se Dand a, ce S:ce C(I 4 ae C19 Choice Function € f@) &) rc} @ always satisfies Weak Axiom of Revealed Preference always violates Strong Axiom of Revealed Preference may not satisfy Weak Axiom of Revealed Preference always satisfies both For Se D and a be S:aeCiQr be CS, For Se Dand bce S: be CIQ cE CI, For Se D and ace S:ae Circe C(I Choice Function C fa) (>) c} @ satisfies only Weak Axiom of Revealed Preference satisfies only Strong Axiom of Revealed Preference does not satisfy Weak Axiom of Revealed Preference satisfies both the Weak and Strong Axioms of Revealed Preference18, 19. 134-4 In the Keynesian model of employment determination a cut in the money wage rate may reduce employment because of the effect of (a) chahges in real balances on consumption expenditure (b) changes in real balances on nominal interest rates (c) changes in the expected rate of inflation {d) changes in the strength of trade unions A positive term premium in the bond market will tend to make the yield curve (a) discontinuous (b) upward sloping (kinked (2) downward sloping According to Keynes, a liquidity trap arises because of (a) the transactions motive for holding money (oj) the precautionary motive for holding money (c) the speculative motive for holding money (a) the instability of long-term expectations 9 [P.7.0.PART-B Each question carries 2 marks Answer Question Nos. 21 to 24 based on the following information : Consider the Solow model in continuous time. Let n denote the rate of growth of the labour force, § the rate of depreciation of capital and s the saving rate in the economy. Suppose the ‘aggregate production function is Cobb-Douglas with output elasticity of labour B. Answer the following questions : a1. 22, 23. 134-4 ‘Suppose that there is pure capital-augmenting technical progress in the economy at the rate of 2% per unit time. Let n = 0-01, 8 = 0-025, s = 0-30.and f = 0-80. What is the rate of growth of the average product of capital in steady state? (a) Less than 1% () Not less than 1% but less than 2% () Not less than 2% but less than 3% (4) Not less than 3% ‘Suppose that there is pure capital-augmenting technical progress in the economy at the rate of 2% per unit time. Let n = 0-01, 6 = 0-025, s = 0-30and B = 0: 80, What is the rate of growth of gross investment in steady state? (a) Less than 1% (b} Not less than 1% but less than 2% {) Not less than 2% but less than 3% (@) Not less than 3% Suppose that there is pure capital-augmenting technical progress in the economy at the rate of 2% per unit time. Let n = 0-01, 8 = 0-025, s = 0-30 and f = 0-80. What is the rate of growth of net investment in steady state? (a) Less than 1% {bh} Not less than 1% but less than 2% () Not less than 2% but less than 3% (a) Not Jess than 3% 1024, 25. 26. BA ‘Suppose that there is equally capital- and labour-augmenting (Hicks neutral) technical progress in the economy at the rate of 2% per unit time. Let n= 0-01, § = 0-025, s= 0-30and f = 0-80. What is the rate of growth of net investment in steady state? (a) Less than 1% (0) Not less than 1% but less than 2% (6) Not less than 2% but less than 3% (4) Not Jess than 3% Let f(x) be a real-valued function of x where x can be any real number. Now consider the foliowing statement : For any two real numbers y and 2, if ysz then flu s fla) ‘The negation of the above statement is one of the following, Which one? fa) There exist real numbers y and z such that yszand f(Y> ft) (b) For any two real numbers y and z, if ys2 then f(y> fle) (c) There are no real numbers y and z such that f(w < fle) (a) None of the above If Aand Bare sets, then A x B= 6 (where ¢ is the null set) is true if and only if one of the following is true. Which one? (@) A=oand Be6 (bh) A=oor B=o () Atgand Beo {d) None of the above27. Let x and y be two different real numbers. Let set A be some neighbourhood of x and let set B be some neighbourhood of y. Let ¢ denote the null set. Which of the following is true? (a) For all neighbourhoods A and B we must have An B=¢ (0) For all neighbourhoods A and Bwe must have An Be ¢ (c] There exists some neighbourhood A and some neighbourhood B for which ANB (a) None of the above Answer Question Nos. 28 to 30 based on the following information ‘There are two cars potentially available for a used-car market with many potential buyers. The first has a value of € 1,000 to its owner and a value of ® 1,400 to a buyer. The second has & value of ® 2,000 to its owner and a value of € 2,400 to a buyer. Using this information, answer the questions below : 29. BOA If everyone has complete information about the cars (a) the first car will sell for © 1,400; the second for 2,400 {b) the first car will sell for € 1,000; the second for ¥ 2,000 ()_ they will both sell for a price of ® 2,000 (a) None of the above ‘Suppose now that the buyers think that for the first car the value could be € 1,400 or zero with equal probability and for the second car the value would be 2,400 or zero with equal probability. What price would they be willing to pay for a car of unknown quality? fa) 2,500 fe) 1,500 @ * 1,900 @) & 2,400 1230. 31. 32, 134-8 Given the price you found in 29 which cars will be available on the market? (2) Both cars (b) Just the first one (©) Just the second one (@) None of them Find all Nash equilibria for the following game : Player 1'| Left | Right Player 2 Down | 0,0 | 4,5 ‘The Nash equilibria are (@) (Up, Left) {b) (Up, Left) and {Down, Right) (©) (Down, Right) (@ No pure strategy Nash equilibria Assume that random variables y x, ¢ are linked by the following linear model : yeariere where the mean of ¢ is zero and the covariance between ¢ and x is also zero. You obtain a random sample {(y;, x;):i= L--n} from the population and run a regression of yon 1 and x. Which of the following statements is true? (a) Parameters a and B are consistently estimated (0) Parameters a and B are consistently estimated only if ¢ is homoscedastic {c) Parameters a and § are consistently estimated only if ¢ is homoscedastic and normally distributed (d) None of the above Up 5,4 | 3,3 ‘33. An individual with a Bernoulli utility function u(w) = Ji has an income of ¥ 90,000. She is given a chance to buy shares in a risky project. There are 10000 shares available at #5 cach. With probability 0°5, the project will be a success and each share will be worth € 11. With probability 0°5, the project will fail and each share will be worthless. How many shares should she purchase? ) 1000 {b) 2000 (©) 3000 (a) 4000 Answer Question Nos. 34 to 36 based on the following information : This problem refers to the short run. Sanatan runs a small farm, The only variable cost he has is the amount of fertilizer to use. His production function is W = 2f°5 where Wis the amount of wheat he'll grow and f is the amount of fertilizer he uses. Some of his fertilizer runs off into a lake. Hiralal fishes on the lake and his only variable cost is his time. His production function is P= 81° — f, where Fis the number of fishes he catches and t is the time he spends fishing. The price of wheat is 2, the price of a fish is 4, the cost of fertilizer is 1, and the cos: of Hiralal’s time is 4. Assume everything can be bought or sold in fractional units, 34, If Sanatan acts independently to maximize his own profit, what amount of fertilizer will he use? (a) seas ) fread fe) fr=5 (a) fe=10 38. If Hiralal acts independently to maximize his own profit, what amount of time will he use? (a) t=15 (o) t=10 () #212 @) #=16 134-8 1436, If they act together to maximize their joint profit, what amount of fertilizer and time will they use? fa) t= 16 fe =4/25 © (c) (a) ‘Answer Question Nos. 37 and 38 based on the following information : A firm produces output using a single factor of production, labour. The production function of the firm is as follows : £10 = 201-1? (oF course, we must have !> 0) ‘The price of a unit of output is 1 and the price of a unit of labour is w= 0. Assume that the firm maximizes its profits. 37. For what values of w would the optimal choice of labour input be 0? {a) It is never optimal to choose 1= 0 (b) w=10 () w>20 (a) None of the above 38. What is the firm's profit function? fa) niuj = 10-w/2 tb) nty=max {i0~ 2, of 2 ={10- ¥) (mu) ( 3 (@ None of the above Anewer Question Nos. 39 and 40 based on the following information : An industry has the following structure. There are 20 firms that behave in a competitive manner and have identical cost functions given by Qy = y?. There is one monopolist that has marginal cost equal to 0. The demand curve for the product is as follows : D{p) = 1000 - 100p 39. If the market price is p, what is the total supply from the competitive sector? 2 @ 3 (o) 2xp () 40xp (@) None of the above (34-4 15 [P.7.0.40. Suppose the monopolist sets the price p, what is its profit-maximizing price? fa) 5 50 (b) Tl @ 2% (a) None of the above Answer Question Nos. 41 to 48 based on the following information : In an underdeveloped economy with two social classes—capitalists (profit eamers) and workers (wage earners}—the State is trying to invest to increase the rate of growth in the near future. , Assuming workers consume all their wages while the consumption propensity of the capitalists is O'S and the burden of lump-sum taxation falls only on the capitalists. The constant capita output ratio is 4 and the initial distribution of income between wages and profits is in the ratio of 2:3, 41. _ Ifprivate and State investments as a proportion of the GDP are 20 percent each, what is the rate of growth of such an economy? (a) 75% (bo) 125% fe) 10% (€) Can't say 42. If the government wants to increase this rate of growth by 2'5%, the tax-GDP ratio to 7 finance this needs to rise from fa) 20% to 40% ‘ (b) 10% to 30% () 15% to 35% 7 {d) Indeterminate BAA 1643, If the capitalists resist this increased taxation, how would this growth be financed? @) eo c) (a) Profit share fails by 10% Wage share rises by 20% Wage share falls by 20% Can't be financed 44, The average income elasticity of per capita demand for necessities is 0-5 and the economy is faced with a maximum rate of growth of necessities of 4%. If the rate of growth of population is 2%, what is the corresponding maximum rate of per capita growth of income without hitting the inflationary barrier? (a) tb) c) (a % 25% 2% 3% 45. Let X= (a,b), N= (1,234) be the set of alternatives and set of individuals in a society respectively. Let the individuals have following preference relations (orderings) : Ry:aPbPePd ie., a is preferred to b preferred to G Ry: bPcPdPa; R,: cPdPaPb; Ry: aPePbPd, where R; is the preference relation of individual i. The set of Pareto efficient alternatives is (ay (b) {c} @) BA fa, bd} {a, b,c} {a, b) ea 17 [PT.0.134-4 SPACE FOR ROUGH WORK 18SPACE FOR ROUGH WORK 134-8 19 [P-7.0.134A SPACE FOR ROUGH WORK ek 20 E16—615*2