Test Contre : __. = Roll Wo. + ame of the Candidate : SAU Entrance Test for MA ( Economics) 2017 [ PROGRAMME CODE : 30002 | Question Paper Series Code : A QUESTION PAPER Time : 3 hours : Maximum Marks + 100 INSTRUCTIONS FOR CANDIDATES Candidates must carefully read the following instructions before attempting the Question Paper : () Write your Name, Roll Number and Name of the Test Centre in the space provided for the purpose on the top of this Question Paper and on the OMR Shect. i} This Question Paper has 50 questions of 2 marks each. All questions are compuisory, ii) A wrong answer will Jead to. the deduction of one-fourth (¥%) of the marks ‘assigned to that question. iv) Please darken the appropriate circle of ‘Question Paper Series Code’ and ‘Programme Code’ on the OMR Sheet in the space provided. (¥) All questions should be answered on the OMR Sheet. (ei) Answers written inside the Question Paper will NOT.be evaluated. (vil) Calcitators and Log Tables may be used, Mobile Phones are NOT allowed. (vii) Pages at the end of the Question Paper have been provided for Rough Work. {is) Return the Question Paper and the OMR Sheet to the Invigilator at the end of the Entrance Test. () DO NOT FOLD THE OMR SHEET. 19-Ae exam 10. INSTRUCTIONS FOR MARKING ANSWERS ON THE ‘OMR SHEET’ ‘Use BLUE/BLACK Ballpoint Pen Only Please ensure that you have darkened the appropriate circle of ‘Question Paper Series Code’ and ‘Programme Code’ on the OMR Sheet in the space provided. Question Paper Series Code Write Question Paper Series Codé A or B im the box and darken the appropriate circle. [laos © Use only Blue/Black Ballpoint Pen to darken the circle: Do-not use Pencil to darken-the circle for Final Answer. Please darken the whole circle. @ Darken ONLY ONE. CIRCLE for each question as shown below in the example : Beample “Wrong Wrong ‘Wrong ‘Wrong. Correct €500|%000|860G|0000|0000 Once marked, no change in the answer is possible, Please do not make any stray marks on the OMR Sheet. Pleas’. do not do any rough work on the OMR Sheet. ‘Mark your answer only in the, appropriate circle against the number corresponding to. the question. A wrong answer will ead to the deduction of one-fourth of the marks assigned to that question. Write your six-digit Roll Number in small boxes provided for the purpose; and also darken the appropriate circle corresponding to respective digits of your Roli Number as shown in the example below. Example : ROLL NUMAER 31s ° D S 1A 2L 19-8 Which country in the South Asian Association for Regional Cooperation (SAARC) has the highest per capila income currently? a India b, Pakistan c. Maldives a Bhutan Suppose a farmer in Pakistan is considering migrating to the city. He is currently earning a daily wage of 100 Pakistani rupees and is expecting a daily wage of. 150 Pakistani rupees in the city. According to the Haxris‘Todaro model, he will a stay back in agriculture as the wage differential is not substantial b. decide to divide his labour time between the rural and the urban sectors migrate to the city as the wage is higher there d, take a decision based on the probability of finding a job at the going wage rate in the ‘ity Non-enforcement of private property rights over productive resources may create more cinployment and income opportunities but may Iead to non-optimal use of resources: In the literature, this idea is referred to as the problem of a, adverse selection tragedy of commons kanife-edge instability 2, external diseconomies ‘The concept of inter-sectoral linkage is important for 2, Balanced growth models >. unbalanced growth models 6, two-seetor growth models alll of the above Disguise unemployment refers to @ situation when a workers are’ underpaid despite. doing a full-time job b, workers. are occupied on a full-time basis even thongh the services they render require less time the economy. experiences underemployment equilibriwn d. unemployment numbers revealed in official statistics do not incorporate some less productive sectors in the economy 3 [P701A Due to tack of availability of reliable income data, expenditure inequality is used as a proxy for measuring incothe inequality in many countries. However, the problem with this proxy is that 2. expenditure inequality typically overestimates income inequality b, "expenditure. inequality typically underestimates income inequality c, expenditure data is even more unreliable than income data 4. both a above and ¢ ‘Suppose in a country the demand for food is exactly equal to the supply of food at a market-clearing price. In such.a scenario a, the entire population of the country will receive adequate food b. the country may suffer from acute famine c, the country docs not import any food none of the above For a country; the head count ratio of income poverty was 28 percent in 2014. If the per capita income of the country grows annually by 5 percent for five years, theri the head count ratio in 2019 a, will decrease to-21 percent b. will decrease to less than 21 percent will decrease to 23 percent 4. may increase, decrease or remain unchanged According to the Prebisch-Singer thesis, if a couritry exports primary products and imports manufactured goods, in the long run it will experience @ a Secular decline in its international terme of trade band itial inerease followed by a decline in its international terms of trade c. a stagnant international terms of trade d. "a sccular increase in its international terms of wade10. 11, 12. 13. 19-A ‘The Lewis model is considered’ to be a ‘classical’ model of development because a. the productivity of labour in the mocern sector is higher than that in the traditional sector b, the supply of labour in the economy is determined by Jabour-leisure choice ¢. — there is unlimited supply of labour available for the modern sector at a given wage rate d. all of the above ‘A.woak preference relation R is called quasi-transitive iff the strict preference relation P is transitive, Four consumers a, b, cand d have preference relations over a triple x, 9, 2 provided below. Which consumer's preference relation satisfics quasi-transitivity? a. xPy 6s yPx & 2Px b. aly & yle & xPe cy & ya & dz a yPe &eahy & xP2 ‘A consumer’s utility function is given by U~max(x,, x9)+min(x, x9). Suppose the price of commodity 1 is $4 and the price of commodity 2 is $8. The consumer's imcome is $40, This consumer will attain equilibrium at a 6.9) b. (10, 9) c , 3} a 2,4) Consider a Leontief production function Q» min(&/2, L/3) where the, price of K is 3 and the price of J is 2. If the firm intends to produce 40 units, the cost minimizing (K, L) combination will be a. 180, 40) Bb, (20, 30) © (80, 120) 4. (120, 80) 5 (PT.14. 18. 16. a7. I9-A Consider a pure exchange economy with two consumers A & 5 and two goods x & y. Suppose the total stock of x and y is 4 units each and cach covswmer has « utility fonction U =x; +44, i= A, Bi The set of Pareto optimal points will be a. the diagonal of the Edgeworth box b. the entire Edgeworth box c. the horizontal axis of the Edgeworth box Gd. the vertical axis of the Edgeworth box If utility is defined over just two goods and one is an inferior good, then the other must be a a necessity good ba humary good ©, another inferior good G. none of the above ‘A risk-neutral person who maximizes expected utility would rank two contracts that respectively offer A« {90, 150} and B~ {150, 30} equally if the respective probabilities py and p were a. equal Le Boma Pam 3 d. none of the above Any Pareto efficient allocation (consider strictly quasi-concave preferences) can be a competitive equilibrium (pure exchange model) if a, cach maximises utility b, cach obeys own budget constraint ©. the.endowment point can be suitably modified d. Walras’ law holds18, 19, 20. 21. 22. 19-& For a monopolist, the demand curve is q 28 and cost curve is ¢(q) = q?. The optimal level of output for the monopolist is a. q=100 bg 50 s qed d. None of the above ‘The own price clasticity of demand for a commodity is 1:5. A drop in the price of the commodity from $3-00 te $280 would result in a, an increase in sales by 15% b. a decréase in sales by 10% an increase in sales by 10% no effect ow sales ‘There are only two price-taking firms in a market, Their cost functions are ©, = xj! and (Cy = 3x3, where x, is the output of the th firm, If the market supply is the sum of the two firms’ outputs, then the market supply function is a xa2p ® z 52 3 c. 5P a x=? 2 Suppose a person lives for two periods. His current period income is 742,000 and he: possesses an asset worth ¢ 18,000. His future income is expected to be #33,000 and the reat rate of interest at which he can borrow or save is {0 percent, His current and future maximum consumptions will be a, €90,000 and #99,000 b. 42,000 and 33,600 c. #75,000 in both the periods 4. £60,000 and #51,000 If the Phillips curve relation is given by mp - 1.3 = ratio will be 0-8iu, ~ 6-5%}, then the sacrifice a 08 b.. 195 6 68 a 75 7 [P.T.0.Direction ; Question Nos. 23 and 24 are based on the following information. Consider an cconomy where the nominal wage rate is set by a process of wage bargaining between the workers arid the producers before actual production takes place. As an outcome of this. process of bargaining, in any period t, the nominal wage rate, W is a function of the expected price levél, P®, the rate of unemployment, u, (representing the relative bargaining power of the workers vis-&-vie the employers} and the avcrage productivity of the workers, A,, ie, W = PEF Ups Ayhs Fy <0, F, > 0. Once the nominal wage is determined, the producers set the actual price level, 7; as a constant markup 4 over the nominal wage rate, P; = (1+p) Wj. PHP, ALE? and the expected sate of inflation tt ‘The actual rate: of inflation is defined as ™ = PF -P, as nf = “Eos, 23. From the above wage and price setting equations, which one of the following equations represents the relationship between the expected rate of inflation and the actual rate of inflation? am =f D+F Ad) Dem = (Lt REL HN p, Ad) 2 my = (485 )1F ip) Ay)—HI-2 4. None of the above 24, Suppose the average productivity of the workers remains constant at a level A. Given the relationship in your answer to the ‘previous question, the ‘natural rate of unemployment’ is given by as. Fey, Alp y 1 b Fu, A= We AD lth 6 Fly, ay= Ten d. none of the above 25. If the agents formulate their expectations according to the adaptive expectation hypothesis, under which of the following circumstances are they most likely to make systematic errors? a, When prices are constant ». When prices fuctuate randomly c. When prices depend only on the monetary policy of the central bank which is anounced beforehand d. When prices depend only on the monetary policy of the central bank which is not, announced beforchand (9-A 826. Suppose the following bilateral spot ‘exchange rates are being quoted for the Afghan Afghani (AFN), Bangladeshi Taka (BDT) and Maldivian. Rufiyaa (MVR) : BDT/MVR = 526 ARN/MVR = 4:54 APN/BDT = 0-88 Hyou start with 100 MVR, the most you could end up with in MVR) in a single round of trilateral arbitrage would be a 9333 b 98:08 101-96 102.67 Direction : Question Nos, 27 and 28 are based on the following information. Consider an economy where the ageregate output is produced by using two factors K and L ‘using @ production function ¥ = KZ". At every point of time, both the factors are fully ‘employed. A constant proportion s of total output is saved and automatically invested at each point in time, leading to augmentation of capital stock. However, the capital is also subjected to depreciation at a rate 5. Labor force ‘grows at a constant rate 1, 2m. 28, 19-4, The sivady-state level of per capita output will be given by a. o£) mn or d. Cannot be determined from thé given information ‘The optimal davings rate which will maximize the per capita consumption level at the steady state will be given by ao bred alata) sa « (aa) 9 [P-T.0,29, 20. 31, 32, 19-8 Suppose in a competitive goods market output is produced by using! only labor such that ¥ = f(Q)-~(i). The wage paid to labor is equivalent to last year's price of ¥, ie, WeaP, ;--Q), where a>0. Since the goods market is competitive, employment is deterinined at the point where margirial product of labor is equal to real wage, ic. when ‘oP, Fuyee 49). Substituting 2} in (3), we have F()= "£4 which after some manipulation gives F”(L) = 2... where mis the inflation rate. The relation (4) implies isn 4, @ permanent unemployment inflation trade-off b. no-trade-off between unemployment and inflation c. that the unemployment inflation trade-off exists only in the short run d. that nothing can be said about the relation between employment and inflation rate In November 2016, the Government of India announced the withdrawal of legal tender status of INR 500 and 1000 notes, constituting around 86 percent by the value of total cash in India. People were given a window of about two months to deposit the old delegalized currency notes in the banks. This was coupled with strict limits on cash withdrawal, so that the amount of cash one could withdraw from the banks was restricted, Assuming that there is no additional policy intervention to influence the rate of interest, the effect of this on the interest rates is likely to be a. an increase isi the rate of ititerest in the short run. followed by a decrease in the Jong run once the withdrawal limits are removed b: a decrease in the rate of interest in the short run followed by an increase in the Jong run once the withdrawal limits are removed an increase in the rate of interest in,both the short run and tong run 4, 8 decrease in the rate of interest in both the short ran and tong run IA, Band D are three events such that Pr(AU BUD) =0-7, then what is the value of Pr{A® ABE NDS)? a 02 b, 08 c OF a 04 If A and B are disjoint events and Pr(B) > 0, then what is the value of Pr(A|B)? a Pr(a) bod 6 0 4. Cannot be determined with the given information 10a3. 34, 35. (9A If 4 is an event such that Pr(A}= 0 and B is any other event, then which one of the following statements is true? a. Aand Bare independent b. A and 8 cannot be independent © Aand Bare disjoint events 4, None of the above Suppose that 10000 tickets are sold in one lottery and 5000 tickets are sold in another lottery, If a person owns 100 tickets in each lottery, what is the probability that she will win at least one first prize? 8. 00537 b. 00122 6. 0.0091 a. 00298 Suppose that 4, B and C ave three independent events such that Pr(A)= 2, Pr(B) = 3 and Pr(C)+ 5. The probability that exactly one of these thies events will occur is 16 a 1 i n 2 ul « it 24 a7 24 If 4. and Bare independent events such that Pri} and Pr (B)> 0, what is the value of PAU BE |B)? a i 3 b 0 2 8 d, Cannot be determined from the given information iL [PTO37. 38. a9, 19-4 If the events A and Brare disjoint and each has positive probability, then a Aand B are independent b, Aand B nay or may not be independent « Aand Bare necessarily dependenit 4. we need more information to ascertain independence If a random variable X has @ discrete distribution with the pf ¢ =, x= 0, 1, 2, Ses) = 42" 0, otherwise the value of the constant c is al b, 2 . # 7 a i 2 ‘Three different machines, M,, Mz and M, were used to produce a large batch of similar manufactured items. Suppos¢ that 20 percent of the items were produced by machine M,, 30 percent by machine M, and 50 percent by machine M,. Suppose further that 1 percent of the. items produced by machine M, are defective, that 2 percent of the items produced by machine M, are defective and that 8 percent of the items produced by machine M, are defective, Finally, suppose that one item is selected at random from the entire batch and it is found to be defective. The probability that this item was produced by machine My is a. 0-45 bd, 0:34 e012 0:26 Consider the following statements : () The tentre of a confidence interval is a population parameter. (i) The bigger the margin of error, the smaller is the confidence interval. {ii The confidence interval ig a type of point estimate. i) A population mean is an example of a point estimate. Which one of the above is/are tre? a. () and (iv) only >. Gi) only Gif) only 4. None of the above 12a 42. 45. 19-8 Assume that B is a 33 matrix with the property that B? = B. Which one of the following statements about the matrix B must be true? ‘ a Bis invertible b, det(B)=0 ce, det(a5).= det(a) . . None of the above A act of 3 vectors in .%* cannot be linearly independent. a True b. Ralse © Depends on the set of vectors one is looking at d. None of the above tin (ELE) wd im (22) would be respectively x x0 eo a Gand2 . b. Ondo e and 2 d 2ando If fand g are continuous at a, then which of the following is not trac? f +g is always continuous at @ a b. fg is always continuous at a (fg is always contimous at a J /q i always continuous at a If f is defined on (0, 1] by fl} =2x- 2x‘, then the range of fis a en b 0,4 © Ge) a [pa] . 13 [P.T.0,46. 47. ag. 49. 50. J9-B Differentiating “— with respect to x, we obtain © ‘The clasticity of y= x"e"* is a 3te® db. Bex © 34e™% do Bt 2x If the function y= AK® for A> 0 and 0 ca<1is defined for all K, then y is a strictly convex , strictly: concave ©. quasi-convex d. quasi-concave ‘the area under the parabola f(z) = x? over the interval (0, i] is Rie Ole Rie ‘The rank of the matrix for v= 68, aol bw 2 « 3 a. 0 14SPACE FOR ROUGH WORK, 19-A 15 {P.T.0.ISA SPACE FOR. ROUGH WORK: ke 16