Started on Saturday, 19 June 2021, 3:01 PM

State Finished

Completed on Saturday, 19 June 2021, 3:46 PM

Time taken 44 mins 56 secs

Question 1
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Q1. (10 marks) (No negative marking)
 Consider Sterling Nuts and Bolts that manufactures nuts and bolts from steel and components that
it purchases
 

Orbital Piston Rings (Rs lakhs) during

Item
2020-21
Sales 1300
Finished goods inventory increase 5
Steel used 800
Labour expense 115
Outsourced services purchase 120
Interest paid on loans 40
Components used 0
Electricity cost 75
Diesel used 10
Other raw materials 50
Indirect taxes net paid 12
Rents paid on land leased in 15
Accumulated depreciation 130
Depreciation during the year 30
 
Compute the following:
A) Output
B) Value added at market prices
C) Contribution to GDP of the company at factor cost
D) Inputs
E) Profits before tax of the company

Gross Valueof output= Value of total sales of

goods and services + value of changes in the 1305
inventories
   
Value Added = Gross value of output - Value of
intermediate consumption (steel used +
250
outsourced services + components purchased +
electricity + diesel + other raw materials
   
Contribution to GDP at factor cost.   
GDP@FC=GDP@MP-NIT 238
   
Inputs cost = cost of labour + raw materials
(intermediatory components) + dep + int paid on 1255
loan
   
Profit before tax = Output cost - Input cost 50
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Q2. This question has 6 sub-questions from Q2.A. to Q2.F.

Please choose the correct answer for each sub-question on the basis of information given in this
main question as below:

Consider a developing economy that is at full employment level of output in the AS-AD framework 
(the standard model). Its current account is in balance. The economy cannot hope to have vast
capital inflows that are autonomous so its balance of payments is equal to the current a/c and the
deficits if any are met out of forex reserves holdings of the central bank. It follows a fixed exchange
rate regime.

Now the economy witnesses a fall in world demand. Bring out the impact of this world demand on
the following by choosing the correct option. (20 marks / Negative marking 100% weight for each
item) (Choose 'Not Attempted' if you do not want to answer)

Question 2
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Q2. A) Impact on Exports? (100% negative marks)
Select one:
a. Fall
b. No Change
c. Rise
d. Not Attempted

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Q2. B) Impact on Income? (100% negative marks)
Select one:
a. Fall
b. No Change
c. Rise
d. Not Attempted

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Q2. C) Impact on Consumption? (100% negative marks)
Select one:
a. Fall
b. No Change
c. Rise
d. Not Attempted

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Q2. D) Impact on investment? (100% negative marks)
Select one:
a. Fall
b. No Change
c. Rise
d. Not Attempted

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Q2. E) Impact on Government Expenditure? (100% negative marks)
Select one:
a. Fall
b. No Change
c. Rise
d. Not Attempted

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Q2. F) Impact on Imports? (100% negative marks)
Select one:
a. Fall
b. No Change
c. Rise
d. Not Attempted

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Q3. (Refer to earlier question) What policy measure would restore the economy back to “full
employment”, i.e, no output gap whether negative or positive? How would the measure work? (10
marks)
To bring the economy to full employment the government will need to increase their spending, this
will largely be towards building roads and other infrastructure projects.
They will also provide incentives for the private sector to invest. They will reduce the interest rates;
which will encourage the corporate sector to borrow and do additonal capex investments. 
Government spending will lead to employment which will lead to higher income and which will lead
to higher expenditure by the public leading to an overall boost to the economy
 

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Q4. A) Which of these goods/services are rival in nature? (Multiple answers allowed) (No negative
marking)
Select one or more:
a. Broadcast radio
b. Transmission of electricity
c. City roads
d. Education

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Q4. B) Which of these goods/services are natural monopolies? (Multiple answers allowed) (No
negative marking)
Select one or more:
a. Broadcast radio
b. Transmission of electricity
c. City roads
d. Education

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Q4. C) Which of these goods/services are experience goods/services? (Multiple answers allowed)
(No negative marking)
Select one or more:
a. Broadcast radio
b. Transmission of electricity
c. City roads
d. Education

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Q4. D) Which of these goods/services are excludable in nature? (Multiple answers allowed) (No
negative marking)
Select one or more:
a. Broadcast radio
b. City roads
c. Transmission of electricity
d. Education

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Q5. A) In which of the goods/services in the given countries will the income elasticity values most
likely be high? (Multiple answers allowed) (No negative marking) (6 marks)
Select one or more:
a. India Cars
b. USA Cars
c. Malaysia Food
d. USA Luxury cars
e. India steel utensils
f. Basic Mobiles USA

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Q5. B) In which of the goods/services in the given countries will the income elasticity most likely
be low? (Multiple answers allowed) (No negative marking) (6 marks)
Select one or more:
a. India Cars
b. USA Cars
c. Malaysia Food
d. USA Luxury cars
e. India steel utensils
f. Basic Mobiles USA

Question 15
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Q6. Government decides to subsidize oranges in the market by selling around 10 tonnes of oranges
a day at Rs. 20 a kilo. The market price of oranges earlier was Rs. 100 and on an average some
1000 tonnes of oranges were sold every day. What is the benefit to the consumers? What do you
think is the effective price of oranges after the subsidization? (5 marks)
Benefit to the consumers = 800 
Effective price of oranges after the subsidization = 20/ kilo
The overall impact to the customer will be very little as the subsidies quantity is only 1% of the
overall consumption.
 

Question 16
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Q7. All poor countries will necessarily converge to the income levels of the rich. (No negative
marking)
Select one:
True
 False

Question 17
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Q8. The East Asian tigers have been able to transform on their own steam. (No negative marking)
Select one:
True
False

Question 18
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Q9. Nationalism has been a strong force in the industrial transformation of the successful countries.
(No negative marking)
Select one:
True
False

Question 19
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Q10. Late industrialization has meant a larger role for the state. (No negative marking)
Select one:
True
 False

Question 20
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Q11. India’s morbidity is lower than its income peers. (No negative marking)
Select one:
True
False

Question 21
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Q12. India’s income inequality is better than that of Bangladesh. (No negative marking)
Select one:
True
False