IAS-MAINS

ECONOMICS (Optional)

Previous years Question Paper (Topic wise)

MONEY – BANKING AND FINANCE

1. Compare the deposit multiplier with the money multiplier. Is there any impact on
the money multiplier arising out of massive use of credit and debit cards? Justify
your answer. (2022)

2. State the cannons of taxation. Do you thing that direct taxes are less burdensome
then indirect taxes in generating equal amount of tax revenue? Justify your
answer. (2022)

3. Give economic rationale for public expenditure on elementary education - in merit

good. (2022)

4. Explain the quantitative methods of credit control adopted by the central bank.
(2022)

5. Describe high powered theory of money supply in brief. State the assumptions
made in its construction. (2021)

6. Do you think that increase in Government spending through borrowing form

public accompanied by fall in required reserve ratio generates recession in the
economy? Illustrate your answer:

(i) In a closed economy with fixed exchange rate.

(ii) In an open economy with fixed exchange rate and without any capital
mobility.
(2021)

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

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

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

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

9. 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)

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

policy affect high-powered money and money multiplier.
(2018)

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11. The Burden of tax depends upon the elasticity of demand and supply of a
commodity or service. Explain with suitable examples. (2018)

12. 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)

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

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

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

16. What is asymmetric information? How could it lead to adverse selection and
market failure? Discuss. (2016)

17. Illustrate the notion of perverse subsidy in the context of natural resource sector.
(2016)
18. Explain repo rate and reverse repo rate. How do changes in the repo rate affect
EMIs of borrowers? (2015)

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

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

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

22. 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)
23. 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)

24. Compare the various instruments of monetary policy with respect to influencing
the cost and availability of credit. (2014)
25. 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)
26. 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)

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27. State five reasons that support government intervention in agricultural markets.
(2013)
28. 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)
29. 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 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)
30. 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)
31. Explain why money supply remains unaffected if budget deficit is met by
borrowing from the public. (2012)
32. Is there any significant difference between Values added tax and Sales tax? If so,
what is
that? (2012)

33. What do you mean by money multiplier? What are the factors that determine the
value of the multiplier? (2012)
34. The ‘Non-rival nature’ of social goods consumption has important bearing on
efficient resource allocation. Explore the problem with the examples and
diagrams. (2011)
35. 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)
36. What is the difference between horizontal equity and vertical equity while
considering ability to pay? How should the problem be resolved? Illustrate
graphically. (2011)
37. 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)
38. How is subsidy better than tariff to achieve domestic objectives? (2011)

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39. What are the different measures of money supply? Explain the concept of money
multiplier and state the factors that determine its volume. (2010)
40. “Subjective approach to taxation leads to least aggregate sacrifice principle.”
Elucidate. Also give the limitations of this principle. (2009)
41. What is high-powered or base money (H)? Is it an autonomous policy-determined
variable? Explain. (2009)
42. “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)
43. 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)
44. Critically examine the Wiseman-Peacock hypothesis of public expenditure. How
does public expenditure help in attaining economic stabilization and higher levels
of production and growth? Elucidate your answer.
(2008)
45. “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)
46. What is internal debt trap? How do the economies of developing countries
commonly fall under this trap? (2006)
47. “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)
48. 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)
49. 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)
50. 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)
51. Trace out the relationship between increasing foreign exchange reserves and
money supply. (2004)
52. Distinguish between the effect and incidence of direct taxation. How do direct
taxes affect the production and savings in the economy? (2004)

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53. Is Wagner hypothesis an adequate explanation of increase in public expenditure
in recent times? Explain. (2004)
54. What do you understand by tax buoyancy and elasticity of tax revenue?
(2004)
55. What is a value-added tax? On what grounds is it generally considered superior
to the conventional commodity taxes? (2003)
56. 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)
57. Elaborate the Ability-to-pay theory for allocation of tax burden. In what different
conditions does the theory lead to progressive taxation? (2003)
58. ‘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)
59. 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)
60. Under what conditions ‘open market operations’ would be most effective tool in
controlling inflation? (2002)
61. Discuss various methods of redemption of public-debt, and give your suggestions
in this context. (2002)
62. What is built-in flexibility? Suggest a few measures that may increase the degree
of built-in flexibility of the budget. (2002)
63. Briefly explain the methods by which the Central Bank controls the volume and
creation of credit. (2001)
64. Explain the main principles which should guide public expenditure in a
developing economy. (2001)
65. Distinguish between progressive and proportional taxation. How can progressive
taxation help in ensuring the equitable distribution of national income?
(2001)
66. 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)
67. Examine the view that monetary factors are the mains causes of all cyclical
fluctuations. (2000)
68. Explain Clearly:
(i) Revenue deficit
(ii) Budgetary deficit
(iii) Fiscal deficit (1997)

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69. Analyse clearly whether expenditure tax should supplement or substitute
income-tax in a developing economy. (1997)
70. Reconcile the apparent contradiction between the following two statements:
(i) “Saving is always equal to investment.”
(ii) “Saving is equal to investment only when the economy is in equilibrium.”
(1996)
71. 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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