IAS-MAINS

ECONOMICS(Optional)

Previous years Question Paper (Topic wise)

MONEY – BANKING AND FINANCE

1. Mention the classification of assets held by a commercial bank. Discuss

the problems faced by commercial bank due to rise in NPAs. (2020)

2. Discuss different forms of subsidies. Explain how perverse subsidies are

detrimental to the economy and environment in the long run. (2020)

3. Explain how money multiplier will be affected if there happens to be

partial hoarding by public in each round as well as excess cash reserve
holding by banks over the minimum required. (2019)

4. What is high-powered money? Explain how changes in short-term

monetary policy affect high-powered money and money multiplier.
(2018)
5. The Burden of tax depends upon the elasticity of demand and supply of a
commodity or service. Explain with suitable examples. (2018)

6. Demonetisation is expected to result in a fall in the ratio of currency to

deposit. Using the money multiplier theory explain its possible impact on
supply of money. (2017)

7. Why do you expect a high correlation between the money supply and
aggregate expenditure? Does this resolve the monetarist-fiscalist debate?
(2017)

8. What is financial repression? Mention some of its consequences. (2017)

9. Distinguish between effective and differential tax incidence. (2017)

10. What is asymmetric information? How could it lead to adverse selection

and market failure? Discuss. (2016)

11. Illustrate the notion of perverse subsidy in the context of natural

resource sector. (2016)
12. Explain repo rate and reverse repo rate. How do changes in the repo rate
affect EMIs of borrowers? (2015)

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13. Derive money multiplier when a part of money supply is exogenous and
the other part is endogenous. (2015)

14. “Subsidies have both positive and negative impacts on the economy.”
Explain this statement and illustrate your answer with Indian
experience. (2015)

15. Explain H-theory of money supply. (2014)

16. What do you understand by shifting of a tax? How does a monopolist
succeed in shifting the burden of a tax under increasing marginal cost?
(2014)
17. Compare the deposit multiplier with money multiplier. Is there any
impact on money multiplier arising out of massive use of credit and debit
cards? (2014)
18. Compare the various instruments of monetary policy with respect to
influencing the cost and availability of credit. (2014)
19. What are the main goals of a central bank? What are the instruments by
which the central bank manages the liquidity in the financial system and
how does it use these instruments to achieve its goals? (2013)
20. What are the three basic goals of public finance? Can these goals be
coordinated into an overall pattern of policy or are they always in
conflict? (2013)
21. State five reasons that support government intervention in agricultural
markets. (2013)
22. Suppose a given yield of tax is to be obtained from an excise on a
particular product in a perfectly competitive industry. If the objective is
economic efficiency the government would prefer that tax which obtains
the desired yield with a lesser increase in the price. Should the
government impose a unit tax or an ad valorem tax if the objective is that
they should both impose the same burden at the initial price before the
imposition of the tax? Demonstrate your answer with a diagram. (2013)
23. What is rent seeking? Consider a proposal by a government to levy a
proportional tax on income so as to subsidize the consumption of a good.
The proportional tax at rate t reduces the wage received t w(1–t) which
with a standard upward sloping supply of labour curve will reduce the
ours of labours worked from say L 2 to L1 . The net income of the person
falls and tax revenue will be twL1 . This is transferred as a subsidy which
reduces the price of the subsidized good from P to P – S and increases
the quantity demanded from Q1 to Q2 . What is the valuation of the
subsidy by the recipient? Is it equal to the value of taxes paid to finance

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 the subsidy? If the tax payer decides to devote resources to rent seeking
to forestall the policy to subsidize the good and the subsidy recipient is
also willing to devote resources to encourage the adoption of the policy,
who will have the advantage in the rent seeking context.? (2013)
24. Mention the different components of supply of money as specified by the
Reserve Bank of India. In what sense is the narrow money ‘narrow’?
(2012)
25. Explain why money supply remains unaffected if budget deficit is met by
borrowing from the public. (2012)
26. Is there any significant difference between Value added tax and Sales
tax? If so, what is that? (2012)
27. What do you mean by money multiplier? What are the factors that
determine the value of the multiplier? (2012)
28. The ‘Non-rival nature’ of social goods consumption has important
bearing on efficient resource allocation. Explore the problem with the
examples and diagrams. (2011)
29. How does the burden of tax distribution between buyers and sellers in
the ratio of elasticity of demand and that of supply take place? (2011)
30. What is the difference between horizontal equity and vertical equity while
onsidering ability to pay? How should the problem be resolved? Illustrate
graphically. (2011)
31. Would the introduction of automatic teller machines, which allows people
to withdraw cash from banks as needed, make deposits more
inconvenient and affect the money supply? Elucidate. (2011)
32. How is subsidy better than tariff to achieve domestic objectives? (2011)
33. What are the different measures of money supply? Explain the concept of
money multiplier and state the factors that determine its volume. (2010)
34. “Subjective approach to taxation leads to least aggregate sacrifice
principle.” Elucidate. Also give the limitations of this principle. (2009)
35. What is high-powered or base money (H)? Is it an autonomous policy-
determined variable? Explain. (2009)
36. “The direct money burden of the tax imposed on any object is divided
between the buyers and the sellers in the proportion of the elasticity of
supply of the object taxed to the elasticity of demand for it.” Discuss.
(2009)
37. Bring out the differences in the definitions of deficit financing given by
different authorities in India and examine the role of deficit financing as
an instrument of monetary control. (2009)
38. Critically examine the Wiseman-Peacock hypothesis of public
expenditure. How does public expenditure help in attaining economic

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 stabilization and higher levels of production and growth? Elucidate your
answer. (2008)
39. “The adjustment to a tax imposition not only affects the distribution of
tax burden but also bears upon the efficiency of resource use in private
sector.”
Substantiate the statement highlighting the role of taxation policy in
improving allocative efficiency in an economy. (2007)
40. What is internal debt trap? How do the economies of developing
countries commonly fall under this trap? (2006)
41. “The objective of fiscal stabilization has become difficult to be achieved in
most of the developing countries due to economic compulsions and
political pressures.” Comment upon the statement. (2006)
42. Discuss the factors responsible for increasing government expenditure.
In this context evaluate the Wagnar’s law and Peacock-Wisemen
hypothesis as explanations of growing public expenditure. (2005)
43. Do you agree with the view that in competitive banking environment,
theBank Rate has lost its effectiveness to control credit? Given reasons
for your answer. (2004)
44. Lately, too much concern has been shown regarding the size of the fiscal
deficit; what matters more is the reason for the deficit rather than the
size. Comment. (2004)
45. Trace out the relationship between increasing foreign exchange reserves
and money supply. (2004)
46. Distinguish between the effect and incidence of direct taxation. How do
direct taxes affect the production and savings in the economy? (2004)
47. Is Wagner hypothesis an adequate explanation of increase in public
expenditure in recent times? Explain. (2004)
48. What do you understand by tax buoyancy and elasticity of tax revenue?
(2004)
49. What is a value-added tax? On what grounds is it generally considered
superior to the conventional commodity taxes? (2003)
50. Examine the modern theory of incidence of taxation highlighting the
main changes which have taken place in the theory vis-à-vis the
traditional theory. (2003)
51. Elaborate the Ability-to-pay theory for allocation of tax burden. In what
different conditions does the theory lead to progressive taxation? (2003)
52. ‘Financial intermediaries not only raise the level of savings and
investment in the economy but also enhance the allocative efficiency of
Investment’. Do you agree with the view? Substantiate your answer with
the help of suitable examples from the developing countries. (2003)

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53. Under what assumptions changes in the money supply results in a
multiple change in the level of money income? Explain and show that the
change in the level of income depends upon the magnitude and direction
of change in the value of money multiplier. (2003)
54. Under what conditions ‘open market operations’ would be most effective
tool in controlling inflation? (2002)
55. Discuss various methods of redemption of public-debt, and give your
suggestions in this context. (2002)
56. What is built-in flexibility? Suggest a few measures that may increase the
degree of built-in flexibility of the budget. (2002)
57. Briefly explain the methods by which the Central Bank controls the
volume and creation of credit. (2001)
58. Explain the main principles which should guide public expenditure in a
developing economy. (2001)
59. Distinguish between progressive and proportional taxation. How can
progressive taxation help in ensuring the equitable distribution of
national income. (2001)
60. Property taxation is often opposed on the ground that it confiscates
savings and capital, and, as a result, discourages economic growth. How
far is this argument valid? (2000)
61. Examine the view that monetary factors are the mains causes of all
cyclical fluctuations. (2000)
62. Explain Clearly:
(i) Revenue deficit
(ii) Budgetary deficit
(iii) Fiscal deficit (1997)
63. Analyse clearly whether expenditure tax should supplement or substitute
income-tax in a developing economy. (1997)
64. Reconcile the apparent contradicition between the following two
statement :
(i) “Saving is always equal to investment.”
(ii) “Saving is equal to investment only when the economy is in
equilibrium.” (1996)
65. What was Keynes’ major innovation in the theory of demand for money?
Show how money market conditions can be the reason behind the
existence of unemployment in equilibrium in Keynesian macroeconomics.
(1995)
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