The Economics Society

SHRI RAM COLLEGE OF COMMERCE

&

present

SAMPLE QUESTION BOOKLET

 Contents
1. Structure of the Olympiad.............................1

2. Section I: Economic Concepts.................2-12

3. Section II: Logical Reasoning.................13-24

4. Section III: Data Interpretation..............25-30

5. Section IV: Case Studies........................31-36

6. Last year papers.....................................37-58

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 Structure of the Olympiad
1. The Olympiad will be conducted in two separate rounds; the first one being
the Preliminary Round and the second one being the Final Round. Please
note that both the rounds will be conducted online via SpeedExam.com and
specific details in this regard will be shared a few days before the Olympiad.

2. The main objective of conducting the Olympiad is to provide the participants

a holistic learning experience. Going beyond the rote learning process,
assessment will be based on application type questions and practical
scenarios. Thus, there is no fixed syllabus.

3. The Preliminary Round will be conducted in Multiple Choice Questions format.

The general structure of the Preliminary Round will be as follows:
I. The paper will be divided into four sections, namely Economic
Concepts, Logical Reasoning, Case Studies and Data Interpretation.
II. There will be 40 questions in total with each section consisting of 10
questions.
III. Participants will be provided with the maximum time of 60 minutes to
complete the Olympiad.
A selected set of top performers in the Preliminary Round will move on to the
Final Round.

4. The structure of the finals will attempt to identify those participants which truly
have the requisite skill and ability to use economics concepts for solving
problems of different types. It’ll be a challenge, more than an examination.
As such, the format of the Finals is specially curated and remains unknown to
any participant, before they actually come face to face with it.

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 Section I: Economic Concepts
(Please note that students of Class XI can ignore the questions related to
Macroeconomics. In the Olympiad, the Class XI students will not be asked questions
which are above their curricular level. However, the Class XII students can be asked
questions from concepts of both classes.)
Solved Examples

Q1. Initially, National Income is Rs. 80 crore and consumption expenditure is Rs. 64
crore. Then, income rises to Rs. 100 crore and consumption expenditure rises to Rs. 78
crore. Calculate the Marginal Propensity to Save?
A. 0.20
B. 0.70
C. 0.80
D. 0.30
Correct Answer- D
Explanation-
Consumer expenditure, C = 64
Income, Y= 80
Increased Consumer expenditure 78
Increased income Y = 100
Marginal Propensity to consume (MPC)= Change in consumer expenditure /change
in income = ∆C/∆T = (78-64)/(100-80) = 14/20= 0.7
Since, MPS=1-MPC, required answer is 0.30

Q2. The table below provides various values of X and Y

Calculate the correlation coefficient between X and Y-

A. -1
B. 0.5
C. 1
D. 0.56
Correct Answer- C
Explanation-

Q3. If the arithmetic mean is multiplied to coefficient of variation then the resulting
value is classified as:

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 A. Coefficient of deviation
B. Coefficient of mean
C. Standard deviation
D. Variance
Correct Answer- C
Explanation-
The coefficient of variation (CV) is defined as the ratio of the standard deviation to
the mean. Therefore, taking mean to the other side, we get the answer as standard
deviation.

Q4. Assuming Ceteris Paribus, when the price of foreign currency rises in India,
national income is:
A. Likely to rise
B. Likely to fall
C. Likely to rise and fall both
D. Not affected
Correct Answer- A
Explanation- The rise in price of foreign currency is known as currency depreciation.
In this situation, more rupees are required to buy a dollar. Hence, this can lead to a
reduction in imports and a rise in exports and thereby, leading to a rise in national
income.

Q5. Price elasticity of demand on a linear demand curve at the y-axis is equal to:
A. Zero
B. One
C. Infinity
D. 0 < Ed < 1
Correct Answer- C
Explanation- Any point on a linear demand curve at the Y axis will represent an
infinite price elasticity of demand. At this point an infinite amount is demanded at a
particular price but nothing is demanded at a slightly higher price.

Q6. Assume that the consumer’s income and the number of sellers in the market for
good X both fall. Based on this information, assuming X is a normal good, we can
conclude with certainty that the equilibrium:
A. Price will decrease
B. Price will increase
C. Quantity will increase
D. Quantity will decrease
Correct Answer- D
Explanation- When the consumer’s income falls, demand for a normal good
decreases. Similarly, when the number of sellers falls, supply for the good decreases.
Since the demand and supply both decrease, we know for sure that the equilibrium
quantity will decrease. However, since we do not know whether about which
decrease among the demand or supply was sharper, we cannot conclude the
impact on price.

Q7. Some details about Company Y’s performance in the year 2019-2020 are given
below:

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I) Raw Materials Purchased - Rs. 15,00,000
II) Opening Stock of Raw Materials - Rs. 1,00,000
III) Closing Stock of Raw Materials - Rs. 80,000
IV) Total Revenue - 35,00,000
V) Opening Stock of Finished Goods (at market price) - 1,80,000
VI) Closing Stock of Finished Goods (at market price) - 2,50,000
VII) Opening Balance of Investments in Stocks - Rs. 10,00,000
VIII) Closing Balance of Investments in Stocks - Rs. 13,00,000
What is the contribution to GDP by Company Y?
A. Rs. 23,50,000
B. Rs. 20,50,000
C. Rs. 22,80,000
D. Rs. 19,10,000
Correct Answer- B
Explanation-
Intermediate Consumption = Opening Stock + Purchases - Closing Stock
= 1,00,000+15,00,000-80,000 = 15,20,000
Contribution to GDP through Sales = 35,00,000-1,80,000 = 33,20,000
Contribution to GDP through Inventory = 2,50,000
Increase in investment value is not a part of GDP as it does not lead to production of
any good or service.
Contribution to GDP = 33,20,000+2,50,000-15,20,000 = 20,50,000

Q8. Which of the following can be true for TVC?

I) TVC1 = 10, TVC3 = 29, TVC5 = 45, TVC7 = 49
II) TVC1 = 10, TVC3 = 25, TVC5 = 56, TVC7 = 108
III) TVC1 = 10, TVC3 = 35, TVC5 = 77, TVC7 = 156
IV) TVC1 = 10, TVC3 = 45, TVC5 = 85, TVC7 = 180
A. Only II
B. Both II and III
C. I, II and III
D. All four
Correct Answer- B
Explanation-
TVC initially increases at a decreasing rate then increases at an increasing rate.
Case I- MC for 2nd unit has to be <10. Therefore MC for 3rd unit has to be > 10.
showing an increasing trend post 3 units.
Therefore TVC5 cannot be equal to 45.
Case II- Possible to display a decreasing trend at 2 units, post which an increasing
trend can be adopted.
Case III- MC for 2nd unit <10. MC for 3rd unit > 16. Post this an increasing trend can
be adopted.
Case IV- MC for 2nd unit <10. MC for 3rd unit > 26. In an increasing trend TVC5
cannot be 85.

Q9. The total profit of a firm equals $400. If its average revenue is $10 for 100 units of
output and if the Average Fixed Cost (AFC) is $1 for 300 units of output, what is the
Average Variable Cost for 50 units of output?
A. 10
B. 0
C. 20

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 D. 5
Correct Answer- B
Explanation- Average Revenue = Total Revenue/ Quantity, therefore total revenue
for 100 units of output equals $(10*100) = $1000.
If at 100 units of output total profit = $400, total cost = $(1000 - 400) = $600.
Now, at 300 units of output, Total Fixed Cost = $(1*300)= $300. Total fixed cost is
constant at levels of output, hence the total fixed cost for 50 units of output is also
$300.
Average fixed cost for 50 units of output = $(300/50) = $6.
If total cost for 100 units of output = $600
total cost for 50 units of output = $((600*50)/100) = $300
Average cost for 50 units of output = $(300/50) = $6
Thus, average variable cost for 50 units of output = Average Cost - Average fixed
Cost = $6- $6 = $0

Q10. Suppose a consumer named ‘B’ deposits $300 cash into his checking account.
What would be the immediate impact on M1 money supply and by how much
could the money supply expand if the reserve requirement is 0.2?
A. Increases M1 money supply and the money supply expands by $1500
B. No change in M1 money supply and the money supply expands by $1200
C. Decreases M1 money supply and the money supply expands by $1500
D. First increases M1 money supply, than decreases and the money supply
expands by $1200
Correct Answer- B
Explanation- Before B deposits money in the bank,
Money Supply = Currency in circulation + Deposits
= $300 + $0
After B deposits the money in the bank, M1 remains unchanged and only the
composition of money supply changes. Now, M1 = $0 + $300.
If the reserve requirement = 0.2, Money Multiplier = 1/0.2 = 5. Now the money which
the bank can loan is (300-300*20%)= $240. Therefore, the total amount of new loans
that can be made from B’s deposits = $(240*5) = $1200.

Unsolved Questions
Q1. Which of the following statements falls under normative economics?
A) The unemployment rate in France is higher than that in the United States.
B) An increase in government spending would lower the unemployment rate.
C) The price of milk should be Rs. 50 per litre to give dairy farmers a higher living
standard and to save the family farm.
D) Although the origins of stock exchanges can be traced back to the stock
exchange in Antwerp (1460), the Amsterdam Stock Exchange is considered
the oldest in the world.

Q2. The Law of Psychological Consumption states that -

A) Consumption does not change in the same direction as income
B) Consumption changes in the same direction as investment
C) Consumption changes in the opposite direction as income
D) Consumption changes in the same direction as income but MPC remains less
than unity

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Q3. Which of the following statements is incorrect?
A) On a linear demand curve, all the five forms of elasticity can be depicted.
B) If two demand curves are linear and intersect each other, then the
coefficient of elasticity would be the same on different demand curves at the
point of intersection.
C) If two demand curves are linear and parallel to each other then at a
particular price the coefficient of elasticity would be different on different
demand curves.
D) The price elasticity of demand is expressed in terms of relative not absolute
changes in price and quantity demanded.

Q4. In the case of India, we have unemployment in rural as well as urban areas.
Consider the following statements in this regard.
1. Sometimes, people will remain unemployed even during the peak of farming
season and this is called seasonal unemployment.
2. In case of disguised unemployment, people appear to be unemployed and is a
form of pseudo unemployment.
3. Educated unemployment is a common phenomenon in urban areas owing to the
high levels of education.
Select the incorrect option-
A) Only 3
B) 1 and 2
C) Only 1
D) 2 and 3

Q5. If demand is linear (a straight line), then price elasticity of demand is -

A) Elastic in the upper portion and inelastic in the lower portion.
B) Inelastic in the upper portion and elastic in the lower portion.
C) Inelastic throughout.
D) Constant along the demand curve.

Q6. Medical care clearly enhances people’s lives. Therefore, we should consume
medical care until -
A) Everyone has as much as they would like.
B) The benefit buyers place on medical care is equal to the cost of producing it.
C) Buyers receive no benefit from another unit of medical care.
D) We must cut back on the consumption of other goods.

Q7. Which of the following is not a characteristic of a competitive market?

A) There are many buyers and sellers in the market.
B) The goods offered for sale are largely the same.
C) Firms generate small but positive economic profits in the long run.
D) All of these answers are characteristics of a competitive market.

Q8. Suppose there is an increase in both the supply and demand for personal
computers. In the market for personal computers, we would expect -
A) The equilibrium quantity to rise and the equilibrium price to fall.
B) The equilibrium quantity to rise and the equilibrium price to remain constant.
C) The change in the equilibrium quantity to be ambiguous and the equilibrium
price to rise.

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 D) The equilibrium quantity to rise and the change in the equilibrium price to be
ambiguous.

Q9. Calculate the Coefficient of Variation of the following- 25, 85, 40, 80, 120
A) 39.76
B) 60 95
C) 48.44
D) 37.84

Q10. From the given options, bring out the one which is not a function/power of
Reserve Bank of India-
A) To assume the responsibility of meeting (directly or indirectly) all reasonable
demands for accommodation
B) To hold cash reserves of the commercial banks and make available financial
accommodation to them
C) To enjoy monopoly over the issuing of notes
D) To assume the responsibility of statistical analysis of data related to the macro
economy of India

Q11. The economist’s objections to monopoly rest on which of the following

grounds?
A) There is a transfer of income from consumers to the monopolist
B) There is welfare loss as resources tend to be misallocated under monopoly
C) Both A and B There is welfare loss as resources tend to be misallocated under
monopoly
D) No economist in the world opposes monopoly because it is an outcome of
the free-market

Q12. The RBI aims to make credit costly for the general public in order to reduce the
availability of credit. What should be done?
A) RBI should reduce the repo rate
B) RBI should increase the repo rate
C) RBI should reduce the CRR
D) None of the above

Q13. If cabbage is an inferior good and it is observed that with fall in price, the
consumer demand also decreases than what can be said about the relative size of
income effect and substitution effect?
A) Income effect >Substitution effect
B) Income effect = Substitution effect
C) Income effect < Substitution effect
D) None of the above

Q14. Relationship between slope and elasticity of supply is-

A) E = P/ Q * 1/ Slope
B) E = Q / P * Slope
C) E = Q / P * 1 / Slope
D) E = Slope

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Q15. If the Marginal Rate of Substitution is constant throughout, the Indifference
curve will be-
A) Parallel to the x-axis
B) Downward sloping concave
C) Downward sloping convex
D) Downward sloping straight line.

Q16. When AR passes through some point between minimum AVC and AC, it is
called-
A) Supernormal profit
B) Loss
C) Break Even point
D) Minimising losses

Q17. Law of Variable Proportions holds when-

A) State of technology is the same
B) All units of the variable factor are homogeneous
C) There is at least one fixed factor
D) All of the above

Q18. How will an indifference curve of two perfectly substitute goods look like?
A) Downward sloping curve
B) Downward sloping straight line
C) Upward sloping curve
D) Horizontal line

Q19. If at 7 units of production the marginal cost and average cost of product X are
the same, which of the following options is possible?
A) At 8 units; MC=Rs.6, AC=Rs.7
B) At 8 units; MC=Rs.9, AC=Rs.10
C) At 6 units; MC=Rs.9, AC=Rs.8
D) At 6 units; MC=Rs.1, AC=Rs.8

Q20. X is a leading pharmaceutical company in India. After years of research and

development, it came up with a medicine that ensures 100% effectiveness against
all types of cancers. The company charges Rs. 50,00,000 for a course of medicine. In
such a situation what options does the government have?
A) Price Ceiling
B) Price Floor
C) Subsidies to company X
D) Both A and C

Q21. In an economy, there is a 200% rise in FDI in one year. What is the likely effect of
this change on the currency of the economy?
A) Depreciation of Currency
B) Appreciation of Currency
C) No change

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 D) Either A or B

Q22. In 2016, X had a salary of Rs. 40,000 per month and he purchased 10 units of
commodity Y, costing Rs. 100 each. In 2019, his salary increased to Rs. 70,000 per
month. What could be a possible value of the number of units of commodity Y
bought by him in 2019?
A) 12
B) 10
C) 8
D) Cannot be Determined

Q23. At producers equilibrium which of the following options is possible?

I) AR=8, MC=8
II) AR=13, MC=9
III) AR=8, MC=10
Options-
A) Only I
B) Both I and II
C) Both II and III
D) All of these

Q24. Demand of Good X at ₹ 100 = 67, Demand of Good X at ₹ 129 = 100. What type
of good is X?
A) Inferior Good
B) Normal Good
C) Giffen Good
D) Both B and C

Q25. The supply curve of Good X intercepts the positive y-axis. What can be said
about the elasticity of demand for X?
A) Unitary Elastic
B) Highly Elastic
C) Inelastic
D) Cannot be determined

Q26. A person takes a loan to purchase a car worth ₹ 10,00,000. He pays an interest
of Rs. 50,000 every year for the next 5 years. What will be the addition to GDP in the
second year?
A) ₹ 0
B) ₹ 50,000
C) ₹ 2,00,000
D) ₹ 2,50,000

Q27. Haryana is one of India’s highest wheat producing states. However, due to a
severe drought , the entire wheat crop gets destroyed. In order to deal with the crisis
the government makes use of its strategic grain reserves. What will happen to the
price of wheat?
A) Increase
B) Decrease
C) No Change
D) Cannot be Determined

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Q28. X,Y, Z are three goods. When the price of X rises, demand for Y falls. Similarly,
when the price of Y rises, demand for Z falls. What is the relationship between good X
and good Z?
A) Complementary Goods
B) Substitute Goods
C) Inferior Goods
D) Cannot be Determined

Q29. In 2004, a massive earthquake, followed by a Tsunami wrecked havoc in the

coastal regions of India. A total of over 2,00,000 deaths had been reported, as a
result of the disaster. What happened to the PPF of India?
A) Shifted to the Right
B) Shifted to the Left
C) India’s production point moved away from the PPF
D) India’s production point moved closer to the PPF

Q30. A person deposits ₹ 10,000 in his bank account, which is immediately

transferred to Y. If the bank is required to keep a combined CRR and SLR of 40%,
what can be said about the money multiplied by the bank?
A) ₹ 0
B) ₹ 4,000
C) ₹ 25,000
D) Cannot be determined

Q31. If When MR is positive, TR ___-

A) Rises
B) Falls
C) Remains Constant
D) None of the above

Q32. Which of the following is true for credit money?

A) Money value < Commodity value
B) Money value = Commodity value
C) Money value > Commodity value
D) Money value <= Commodity value

Q33. What among the following accounts for market changes resulting in increased
price and unchanged quantity exchange (assuming that both demand and supply
are neither perfectly elastic nor perfectly inelastic) ?
A) Decrease in supply and Decrease in demand
B) Increase in supply and Increase in demand
C) Decrease in supply and Increase in demand
D) Increase in supply and Decrease in demand

Q34. If the opportunity cost of producing two goods is constant, then which of the
following statements is true-
A) Production possibilities curve is curved inward
B) Production possibilities curve is curved outward
C) Production possibilities curve is linear i.e straight
D) Production possibilities curve has an increasing slope.

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Q35. If the tariff on an imported laptop increases, then what are the possible effects
on consumer surplus, producer surplus and net welfare?
A) Consumer Surplus increases, producer surplus increases, net welfare increases
B) Consumer Surplus decreases, producer surplus increases, net welfare
increases
C) Consumer Surplus remains unchanged, producer surplus increases, net
welfare decreases
D) Consumer Surplus decreases, producer surplus increases, net welfare
decreases

Q36. Suppose the total population of a country is 200 million. The labour force is 100
million. If 10 million people are discouraged workers that means those workers who
are not currently looking for work, but if given would take up the job. Out of the
labour force, 80 million are employed full time and 10 million are employed part
time. What is the current unemployment rate?
A) 10%
B) 50%
C) 90%
D) 80%

Q37. If the demand for a commodity is perfectly elastic and the cost of producing
the commodity falls, what will happen to the equilibrium price and quantity of the
commodity?
A) Equilibrium price increases and quantity remains unchanged
B) Equilibrium price decreases and quantity increases
C) Equilibrium price increases and quantity decreases
D) Equilibrium price remains unchanged and quantity increases

Q38. If a perfectly competitive firm is operating where the price is greater than
Average Variable Cost but less than Average Costs, what should the firm do?
A) Immediately shut down
B) Continue operations in the short run even though there’s an economic loss
C) Continue operations only in the short run and shut down in the long run
D) Shut down until price is equal to or greater than average costs.

Q39. Which of the following is represented by a L-shaped indifference curve?

A) Perfect Complements
B) Giffen goods
C) Perfect Substitutes
D) Inferior goods

Q40. Choose the statement or statements which satisfy the conditions when the
economy is running above full employment level?
1. Builds up inflationary pressure in the economy
2. Real gross domestic product is higher than usual
3. More demand for goods and services and hence increased production.
4. There is excess supply.
Options:
A) 2 and 3 only
B) 1, 3 and 4 only

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 C) 1, 2 and 3 only
D) 2,3 and 4 only

Answers:

1. C 2. D 3. B 4. B 5. A 6. B 7. C 8. D
9. C 10. D 11. C 12. B 13. A 14. A 15. D 16. D
17. D 18. B 19. D 20. A 21. B 22. D 23. B 24. C
25. B 26. A 27. D 28. D 29. B 30. C 31. A 32. C
33. C 34. C 35. D 36. A 37. D 38. B 39. A 40. C

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 Section II: Logical Reasoning
Solved Examples
Q1. Identify the next term in the following- 48, 120, 72, 168, 312, ?
A. 120
B. 389
C. 495
D. 56
Correct Answer- A
Explanation- The above sequence is based on the following rule-
Each term is the difference between a prime number and another prime number
preceding itself, starting from 13.
Therefore;
132-112=48
172-132=120
192-172=72
232-192=168
292-232=312
312-292=120

Q2. Determine whether integer p is a prime number or not.

Given, p= 10! + k, where 1 < k < 8.
A. Not possible to calculate
B. Not a prime number
C. Not sufficient data
D. It is a prime number
Correct Answer- B
Explanation-
k = 2, 3, 4, 5, 6, 7. Hence if k is added to p, it becomes a factor of that number and
thus, p is not a prime number.

Q3. Rajesh is facing the South . He drives straight for 5 kilometres. He then turns left
and drives 12 kilometres. Then he turns to his right and drives 5 kilometres. He then
turns to his right and drives 10 kilometres. After that, he takes a left and walks 5
kilometres. Here, he meets his friend, who tells him about a famous restaurant that
has recently opened. He decides to go to the restaurant and taste some delicious
food. So, he again turns to his left and walks another 6 kilometres. Finally, he takes a
left and drives another 9 kilometres to reach the restaurant. If there existed a straight
road connecting his house to the restaurant, what could have been the minimum
distance he'd have to travel?
A. 15 kilometres
B. 10 kilometres
C. 13 kilometres
D. 20 kilometres
Correct Answer- B
Explanation-
Rajesh traces the following path-

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In the above figure, ∆ACB (a right angled triangle) can help in calculating the
distance AB. The height AC equals 6 Kilometres (5+5+5-9) and the base CB equals 8
kilometres (6+12-10). Therefore, by Pythagoras theorem, AB equals 10 kilometres.

Q4. Complete the series-

4+5+2 = 79
2+4+3 = 76
7+2+1 =
A. 30
B. 98
C. 39
D. 62
Correct Answer- C
Explanation-
4+5= 9, 5+2 = 7, 79. Same as the logic for the rest. Therefore, the answer is 39.

Q5. A,B and C are three friends standing in a line of 41 students. A is 15th from the
front, B is 23rd from the back and C is standing in the middle of the row. C moves 6
places towards the front. B then moves 4 places to the front. What place is A
standing in?

A. 15th from the front

B. 26th from the back
C. 25th from the back
D. 14th from the front
Correct Answer- C
Explanation-
A - 15th
B - 19th
C - 21st
C moved 6 places ahead-
C - 15th
A - 16th
B - 20th
B moved 4 places ahead-
C - 15th
B - 16th
A - 17th

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Directions Q6-7
At 6 am, A is standing 25m on the right of B. A is facing East and B is facing North. The
two take the following routes thereafter-

Time A

6-00-6-15 25m to the

right

6-15-6-30 25m to the left

6-30-6-45 25m to the left

6-45-7-00 25m straight

7-00-7-30 25m to the

right

Time B

6-00-6-15 25m to the

right

6-15-6-30 25m straight

6-30-7-00 25m to the left

7-00-7-15 25m to the

right

7-15-7-30 25m to the

right

Q6. Once they meet, both A and B rotate 180 degrees. Where is B now with respect
to A’s starting position?
A. 50m North
B. 50m East
C. 50m West
D. 50m South
Correct Answer- A
Explanation-

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The diagram shows the routes of A and B. Point X is not the point where A and B
meet because A reaches point X at 6-45, while B reaches Point X at 6-30. Both of
them reach Point Y at 7 and thus, at this point they rotate 180 degrees.

Q7. Once they meet, both A and B rotate 180 degrees. What part of their routes are
common?
A. 20%
B. 40%
C. 60%
D. None of the above
Correct Answer- B
Explanation- As clearly shown in the diagram, 2 out of the 5 stretches are common
for both A and B. Therefore, 40% of their routes are common.

Q8. Find the missing term “?”

3, ?, 145, 1649, 23401
A. 101
B. 17
C. 49
D. 23
Correct Answer- B
Explanation-
12+21=3
23+32=17
34+43=145
45+54=1649
56+65=23401
Therefore, the answer is 17.

Q9. Suppose a train ‘G’ leaves Mumbai at 4-00 AM and reaches Surat at 8-00 AM.
Another train ‘H’ leaves Surat at 6-00 AM and reaches Mumbai at 10-30 AM. At what
time do the two trains travel in order to cross each other?
A. 7-04 AM
B. 6-56 AM
C. 8-10 AM
D. 7-30 AM
Correct Answer- A
Explanation-
The time (t) is calculated only after 6-00 AM, since between 4-00 AM to 6-00 AM only
train G is travelling. Speed of G = d/4, speed of H= d/4.5 and the distance covered
by both the trains after G has reached half of the distance at 6-00 AM and when H is
about to start is d/2.
The equation formed is -
d/2 = (d/4*t)+(d/4.5*t), solving the equation t comes to 18/17 hours which is equal to
64 mins (approx). Thus, the time at which the two trains travel in order to cross each
other is 7-04 AM.

Q10. Identify the missing country: China, Italy, Mexico, Peru, Brazil, India, "?"
A. Jordan
B. Argentina
C. Spain

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 D. Papua New Guinea
Correct Answer- A
Explanation- New7Wonders of the World was a campaign started in 2000 to choose
Wonders of the World from a selection of 200 existing monuments. The winners were -
Great Wall of China in China, Colosseum in Italy, Chichen Itza in Mexico, Machu
Picchu in Peru, Christ the Redeemer in Brazil, Taj Mahal in India and Petra in Jordan
(the list doesn't follow any order.) Therefore, the required answer is Jordan.

Unsolved Questions
Q1. Mahendra owns two businesses, X and Y. He provides Rs. 15,000 as monthly
salary per employee in business X, and Rs. 10,000 as monthly salary per employee in
business Y. There are 27 employees in business X and 48 employees in business Y.
Now, Mahendra wants to employ an additional 25 employees, distributed between
both the businesses in such a way that the average salary turns out to be Rs. 12,250.
How should he distribute his additional employees?
A. 9 in X and 16 in Y
B. 13 in X and 12 in Y
C. 18 in X and 7 in Y
D. 10 in X and 15 in Y

Q2. Krishi works in a famous firm as an executive manager. He earns a respectable

income, a part of which he uses to meet his current consumption demands and
saves the remaining part for the future. After a month of dedicated and consistent
work, Krishi's employers are impressed and raise his income by 6%. Krishi decides to
keep his consumption at the same level as in the previous month. Hence, his savings
rise by 21,000. Calculate the amount of his consumption, which was 60% of the
income he earned in the previous month.
A. Rs. 1,50,000
B. Rs. 2,10,000
C. Rs. 1,60,000
D. Rs. 1,80,000

Q3. If A + B means A is the brother of B; A - B means A is the sister of B and A x B

means A is the father of B. Which of the following means that C is the son of M?
A. M - N x C + F
B. F - C + N x M
C. N + M - F x C
D. M x N - C + F

Directions Q4-5
Carefully study the following information to answer the questions given below-
I. Eight people E, F, G, H, I, J, K and L are seated around a square table, two on
each side.
II. There are three women and they are not seated next to each other.
III. J is between L and F.
IV. G is between I and F.
V. H, a woman , is second to the left of J.
VI. F, a man is seated opposite to E, a woman .
VII. There is a woman between F and I.

17
Q4. Who among the following is seated between E and H?
A. G
B. J
C. F
D. K

Q5. Who among the following are the women ?

A. E, H and J
B. E, G and J
C. G, H and J
D. None of these

Q6. A girl was born on September 1, 1970, which happened to be Tuesday. The next
birthday will be Tuesday in the year–
A. 1975
B. 1981
C. 1977
D. 1982

Q7. Six boys A, B, C, D, E and F play a game of cards. Each has a pack of 10 cards. F
borrows 2 cards from A and gives away 5 to C who in turn gives 3 to B while B gives 6
to D who passes on 1 to E. Then the total number of cards possessed by D and E is
equal to the total number of cards possessed by–
A. A, B and C
B. B, C and F
C. A, B and F
D. A, C andF

Q8. If the 2nd half of an English alphabet is written in the reverse sequence, which
will be the 6th letter at right from the 18th letter from left?
A. X
B. P
C. O
D. N

Q9. A clock is set correctly at 8 A.M. The clock gains 10 minutes in 24 hours. What will
be the true time when the clock indicates 1 P.M. on the following day?
A. 48 min. past 12
B. 46 min. past 12
C. 45 min. past 12
D. 47 min. past 12

Q10. A man is standing on a railway bridge which is 180 m long. He finds that a train
crosses the bridge in 20 seconds but crosses him in 8 seconds. Find the length of the
train and its speed.
A. 120 m, 54 kmph
B. 140 m, 60 kmph
C. 140 m, 66 kmph
D. 160 m, 60 kmph

18
Q11. This question consists of a question and two statements numbered I and II given
below it. You have to decide whether the data provided in the statements are
sufficient to answer the question. Read both the statements and give the answer.
Question-
Among A, B, C, D and E, who is in the middle while standing in a row ?
Statements-
I. C, who is third to the left of D, is to the immediate right of A and second to the
left of E.
II. C is second to the left of E, who is not at any of the ends and who is third to
the right of A. D is at one of the ends.
Options-
A. I alone is sufficient while II alone is not sufficient
B. II alone is sufficient while I alone is not sufficient
C. Either I or II is sufficient
D. Neither I nor II is sufficient

Q12. There is a point M which is 14m east of point N. Point E is 4m west of point B.
Point G is 10m east of point F. Point F is 15m south of point N. Point C is 7m north of
point G. Point A is 2m east of point C. Point B is 12m north of point A.
Point G is in which direction with respect to B?
A. South-West
B. North-East
C. North-West
D. South-East

Directions Q13-16
Study the following information carefully and answer the questions given below.
If
'18 42 27 72' is coded as '49 4 81 25'
'93 28 44 16' is coded as '144 25 0 36'
'16 84 73 52' is coded as '9 25 100 16'

Q13. What is the code for '64 63 31'?

A. 4 81 16
B. 25 43 6
C. 67 89 15
D. 7 91 34

Q14. What is the code for '29 42 81'?

A. 125 36 5
B. 121 4 81
C. 100 49 100
D. 4 25 36 125

Q15. What is the code for '94 15 32'?

A. 144 25 1
B. 1 100 36
C. 169 4 36
D. 25 36 1

Q16. What is the code for 84 13 22

19
 A. 16 16 0
B. 25 36 69
C. 96 52 63
D. None of the above

Q17. Complete the series -- 377,147,28,16,?

A. 6
B. 10
C. 7
D. 13

Q18. Complete the series- 336,210,120,60,24,?

A. 12
B. 6
C. 18
D. 10

Q19. On a regular die, A is opposite to F, B is opposite to E and C is opposite to D.

Based on the information below, what is B?
I) A is a prime number.
II) B is an even number.
III) D is 3
A. 6
B. 2
C. 4
D. Cannot be determined

Directions Q20-22
Five people - A,B,C,D and E gather for a meeting. Two of them like to eat Chocos,
while the other three like to eat Muesli, Cornflakes and Fruit Loops respectively. One
Chocos lover and the Fruit Loops lover live in block X, while the other three stay in
blocks W, Y and Z respectively. Two of them work for McKinsey while the other three
work for Bain and Company, BCG and AT Kearney. The person who likes Fruit Loops is
the heaviest, while one of the persons who likes chocos is the lightest and likes
swimming. The other person who likes chocos has a weight between that of the
person who likes fruit loops and the person who likes Muesli. D lives in block W. B
works for AT Kearney, while A works for McKinsey and likes Chocos and swimming. D
likes cornflakes and the person who likes Muesli lives in block Y. E is the third lightest
person. C lives in block Z. Only one person is lighter than D. The person who works for
Bain and Company lives in a block which is between the block of the people who
work at McKinsey.

Q20. Who works for BCG?

A. C
B. D
C. E
D. Cannot be Determined

Q21. Which pair likes Chocos?

A. A and B
B. A and C

20
 C. A and E
D. Cannot be determined

Q22. Which pair works for McKinsey?

A) A and C
B) A and D
C) A and E
D) Cannot be determined

Q23. Consider the following-

Statements-
1. The growth rate of the United States is increasing.
2. Inequality is a problem associated with high economic growth.
Inferences-
1. All the economically powerful countries in the world have high inequality.
2. Highly unequal countries are economically powerful.
3. United States, the most developed country has high levels of inequality
4. United States may become a highly unequal country.
Options:
A. None is appropriate
B. Only 4 is appropriate
C. All are appropriate
D. Only 2 is appropriate

Q24. A, B, C, D, E, F and G are from the same family. 4 people are married in the
family. Parents of all the children in the family are alive. C is the sister of B. E is the
brother of F. F is a female. A is father of F. G is mother of B. D is mother-in-law of G.
How is B related to E ?
A. Son
B. Nephew
C. Daughter
D. Cannot be determined

Q25. In a die, A is the top side and B and C are two sides adjacent to it.
In the given die, the following statements hold true-
I) Sum of A and B is greater than 6.
II) B and C aren’t consecutive numbers.
III) A and B aren’t opposite sides of a regular die.
IV) Sum of the other 3 sides is 12.
What is A?
A. 2
B. 4
C. 5
D. 6

Directions Q26-28
A,B,C,D,E,F,G and H are 8 students in a class. In a test, the following statements hold
true-
I) A scored higher than B.
II) B scored higher or equal to D.
III) D scored less than C.

21
IV) H scored higher than A but lower than C.
V) E scored higher than or equal to D but lower than C.
VI) F and G scored the same marks but less than A.

Q26. Who scored the highest?

A. A
B. C
C. E
D. Cannot be determined

Q27. Which of the following statements can never be true?

A. D scored the same as G
B. E scored the same as A
C. E,B and D scored the same marks
D. A scored less than D

Q28. Which of the following statements can hold true?

A. F scored the lowest
B. A scored the same as D
C. E scores the lowest or the highest
D. B scores the third highest marks

Q29. If MOUNTAIN is coded as NPVMGBJM and TEACHER is coded as GFBXSFI, then

how is CHILDREN coded as--
A. DIJKWSFM
B. XIJOEIVM
C. XSJOWIFM
D. DSRKESVM

Q30. A woman introduces Rohit to a gathering as follows- ‘He is the brother of the
only daughter of the only child of my uncle. At the same time another man
introduces Rohit as follows- ‘He is the grandson of my cousins, mother's brother.
How are the man and the woman related?
A. Siblings
B. Cousins
C. Siblings or Cousins
D. Cannot be Determined

Directions Q31-33
A team of 6 has to be selected from five boys - A,B,C,D and E and five girls -
V,W,X,Y,Z. The following things have to be kept in mind while forming the team:
I) A and D have to be together
II) B cannot go with X
III) V and W have to be together
IV) D cannot go with Y
V) C and E have to be together
VI) Z cannot go with E
VII) V and Y cannot go together

Q31. If there have to be 4 boys on the team, who cannot be a part of the team?
A. V

22
 B. W
C. X
D. Cannot be determined

Q32. If the team has 3 boys, who cannot be a part of the team?
A. A
B. C
C. V
D. W

Q33. If the team has 2 boys, who can be a part of the team?
A) A
B) B
C) C
D) Y

Q34. If Ram has 3 parcels having a combined weight of 50 pounds, what is the
weight of the heaviest parcel?
1. One parcel weighs 15 pounds
2. One parcel weighs 25 pounds
Choose among the following options-
A. Statement 1 is alone sufficient to answer this question but Statement 2 is not
sufficient alone
B. Both of the statements are not sufficient to answer the question
C. Statement 2 is alone sufficient to answer this question but Statement 1 is not
sufficient alone
D. Both statements are required to answer the question.

Directions Q35-36
Five Boys Nobita, Ashwin, Dipayan, John and Bheem and five girls Radha, Yuvika,
Yuvana, Sneha and Khushi are sitting in two rows facing towards each other. All the
boys are in one row and all the girls are in the other row. Bheem, who is to the
immediate left of Ashwin and opposite to Radha, is not at any end. Yuvika, who is at
the immediate right of Yuvana and opposite to Nobita, is at one of the ends. John is
opposite to Yuvana who is the first to the right of Sneha. Khushi and Dipayan are not
opposite to each other.

Q35. How many boys are between Bheem and John?

A. 0
B. 3
C. 1
D. 2

Q36. Who is immediately to the left of Radha?

A. Sneha
B. Khushi
C. Yuvana
D. Yuvika

Q37. In view of the stiff competition faced by companies ABC ltd and MN Ltd,
Dwarka Ltd is concerned with the quality of its bottles.

23
Which of the following can be a possible consequence for the fact mentioned in the
above statement.
A. Dwarka Ltd will stop manufacturing bottles and concentrate on the other
businesses.
B. Dwarka Ltd will start attracting new talent to improve its bottle manufacturing,
by employing top notch talent.
C. Dwarka Ltd will increase the prices of its bottles so as to earn higher profit and
use it for investment.
D. Both 2 and 3.

Q38. How far, in kilometers, can Robin drive into the desert if he drives out at 50
kilometres per hour (kph), returns over the same road at 20 kph, and spends 8 hours
away from home, including a 1-hour stop for lunch?
A. 150
B. 100
C. 120
D. 90

Q39.
1. x is the remainder when positive integer z is divided by positive integer (z-1).
2. z is not a prime number.
What is the value of integer x?
A. Statement (2) alone is sufficient, but statement (1) alone is not sufficient to
answer the question.
B. Statement (1) alone is sufficient, but statement (2) alone is not sufficient to
answer the question.
C. Both statements are not sufficient to answer the question.
D. Both statements are together sufficient to answer the question.

Q40. If MONKEY is coded as LJKNVB, then BARLEY will be coded as-

A. WURQVB
B. YZRKGM
C. DYUIFL
D. WXGMVB

Answers:

1. C 2. B 3. D 4. D 5. D 6. B 7. B 8. B
9. A 10. A 11. C 12. A 13. A 14. B 15. D 16. A
17. A 18. B 19. A 20. B 21. B 22. A 23. B 24. D
25. A 26. B 27. D 28. A 29. C 30. C 31. C 32. B
33. A 34. C 35. C 36. B 37. B 38. B 39. C 40. D

24
 Section III: Data Interpretation
Solved Examples
Directions Q1-3
Set 1- The diagram below shows Country X's exports and imports of goods and
services from 2015-16 to 2018-19.

Q1. What is the balance of payment situation in the country in 2018-19?

A) Surplus BOP
B) Deficit BOP
C) Balanced BOP
D) Cannot be Determined
Correct Answer- D
Explanation- Since the graph only shows exports of goods and services it can be
used to determine BOT but not BOP.

Q2. In 2016-17, Country X had a positive current account balance. Which of the
following statements are true?
A) Country X may or may not have positive net unilateral transfers
B) Country X has positive net unilateral transfers
C) Country X has positive net income from abroad
D) Both B and C
Correct Answer- A
Explanation- Unilateral Transfers and Net Income from Abroad are two components
of Current Account Balance. In 2016-17, country X has a BOT deficit. But a positive
current account balance does not necessarily require both unilateral transfers and
net income from abroad to be positive.

Q3. Which of the following does not move the trade situation in the opposite
direction in 2017-18?
A) Unilateral Transfers to X - $0.13 billion, Unilateral Transfers from X - $0.09billion

25
 B) FPI in X - $1.1billion, FPI from X - $1.6billion
C) FII in X - $0.8billion, FII from X - $0.5billion
D) None of the above
Correct Answer- B
Explanation- In order to move in the opposite direction inflows should be higher than
outflows. Only option B meets the requirements.

Directions Q4-6
Set 2- The rupee-dollar exchange rate for the first 6 months of 2020 has been given
below. Based on it, answer the questions that follow.

Q4. What is the phenomenon occurring from April-May?

A) Deprecation of the US Dollar
B) Appreciation of the US Dollar
C) Depreciation of the Indian Rupee
D) Both B and C
Correct Answer- A
Explanation- The period of April-May leads to fall in the foreign exchange rate
implying appreciation of the Indian Rupee. An appreciation of the Indian rupee
means a depreciation of the US Dollar. Therefore answer is A
Q5. The period of March-April is favourable for-
A) Indian Exports
B) Indian Imports
C) American Imports
D) Both A and C
Correct Answer- D
Explanation- During this period, Indian currency depreciates. This makes it Indian
exports cheaper, while also making it cheaper for American to import Indian goods.

Q6. Which of the following cannot be a reason for the change in Rupee-Dollar
Exchange Rate in the April-May period?
A) Increase in supply of Dollars in the Indian market
B) The decrease in the supply of the Indian Rupee in the US market
C) The decrease in demand for dollars in the Indian market

26
 D) Increase in demand for the Indian rupee in the US market
Correct Answer- B
Explanation- If the supply of Indian Rupee (Foreign Exchange) falls in the US market,
the supply curve shifts leftwards, resulting in an increase in price of foreign exchange
i.e. depreciation of the US dollar. Depreciation of the US dollar means appreciation
of the Indian currency, as depicted by the graph.

Unsolved Questions

Directions Q1-3
Set 1- The given chart depicts the composition of Country A, B, C, D and E’s
budgetary expenditure.

Q1. One of the advisors of Country A suggested that the government should
increase expenditure on the defence sector due to increasing hostility with
neighbouring countries. He also suggested that expenditure on infrastructural
development should be reduced to finance the defence expenditure. This is an
example of--
A) Opportunity Cost
B) Sunk Cost
C) Implicit Cost
D) None of the above

Q2. Assuming that resources in different countries are equally efficient, total
expenditure in all countries is equal and all productive activity in the economy is
proportional to government expenditure, which country has the highest GDP?
A) Country A
B) Country B
C) Country C
D) Country D

27
Q3. If the government of Country X wants to increase its expenditure on education
without compromising expenditure on any other sector, what alternatives does it
have?
A) Borrow from other Countries
B) Borrow from the World Bank
C) Print new currency
D) All of the Above

Directions Q4-6
Set 2-

Q4. Choose the period in which the United States faced the same or similar inflation
rate as shown by the graph between 2005 and 2010.
1. 1873 to 1879
2. 1812 to 1815
3. 1930 to 1933
4. All of the above

Options
A. Only 4
B. 1 and 3
C. 2 and 3
D. Only 3

Q5. Suppose the required reserve ratio is 10% during the 1980s and during this period
one of the economists suggested that the Central Bank should buy a $5000 bond
from the commercial banks. What is the money supply in the economy after the
Central Bank buys the bond and how does it affect the inflation rate?
A. Increase in money supply by $5000 and an increase in the inflation rate
B. The decrease in the money supply by $50000 and a decrease in the inflation
rate
C. Increase in money supply by $50000 and increase in the inflation rate
D. The decrease in the money supply by $5000 and an increase in the inflation
rate

28
Q6. For any country, which of the following contributes to a situation as depicted by
the part of the graph below Zero?
A. Decrease in Consumption
B. Net Capital Outflow from the economy
C. Excess Production
D. All of the above

Directions Q7-9
Set 3-

Q7. If Netherland’s manufacturing constitutes more capital goods compared to

Japan, then according to the bar graph shown above, which country will have the
maximum shift in the production possibilities curve in the future and in which
direction?
A. Japan will have the maximum rightward shift
B. Netherlands will have the maximum rightward shift
C. Both of them will have the same magnitude of rightward shift
D. Japan will have a leftward shift compared to Netherlands

Q8. Suppose all the countries are operating in a closed economy wherein private
saving is 20% and consumption expenditure on goods only is 80% in all the countries.
Assuming this, choose the country which will have the highest M1 money supply in
the economy and also the country with the highest household saving rate. (There is
no government purchase of goods in these countries).
A. Japan- highest M1 money supply and UK- highest saving rate.
B. Netherlands- highest M1 money supply and Sweden- highest saving rate.
C. Australia- highest M1 money supply and Japan- highest saving rate.
D. Sweden- highest M1 money supply and Australia- highest saving rate.

Q9. What type of exchange rate will allow a country to exchange its domestic
goods for foreign goods? Also, if Japan has a comparative advantage for all capital
goods over other countries, then which country should most likely trade its capital
goods for common welfare?
A. Real Exchange Rate and the country is Sweden

29
 B. Nominal Exchange Rate and the country is Japan
C. Real Exchange Rate and the country is Japan
D. Nominal Exchange Rate and the country is Sweden

Directions Q10-11
Set 4- The graph below shows the data for Reverse Repo Rate

Q10. Why do you think RBI is reducing the reverse repo rate?
A. To attract banks to borrow more from the RBI
B. A low reverse repo rate might allow banks to lend more to the public
C. A low reverse repo rate will increase inflation
D. None of the above

Q11. Taking into consideration the economic catastrophe the current pandemic has
caused , what do you think is the possible outcome in case the RBI raises the interest
to the same level as per in July 2019
A. A high reverse repo rate will lead to an increase in lending rates by banks
B. A high rate will induce consumers and firms to take more loans from banks
C. A high rate will demotivate banks to keep their money with RBI
D. It will allow banks to lend more money to consumers

Answers:

1. A 2. D 3. D 4. B 5. C 6. D
7. B 8. D 9. C 10. B 11. A

30
 Section IV: Case Studies
Solved Examples

Directions Q1-3
Case 1- China, the country described by the World Bank as “the fastest sustained
expansion by a major economy in history” has raised millions of its citizens out of
poverty and is one of the World’s largest economy on purchasing power parity basis
and also the largest holder of foreign exchange reserves. But the manufacturing
superpower has faced slower economic growth over the past years and economists
fear that this diminishing rate might engulf China in the middle-income trap. This has
made it even more important for China to acknowledge their reliance on exports
and fixed investment and the need to shift attention towards innovation, private
consumption and services. Sustainable economic growth in the long run will require
consumer spending to increase. As per the National Economic Accounting, Chinese
household consumption is relatively low. Now, based on the basis this information,
answer the questions given below:

Q1. Chinese Government launched the “Make in China” initiative in 2015 to foster
innovation in 10 key sectors. If we suppose that technological advancement has
increased productivity over the past 5 years, than there has been a change in the
price of the products. Now, this change in price will make consumers react in a
manner that Marginal Utility will-
A. Increase
B. Decrease
C. No change
D. Cannot be determined
Correct Answer- B
Explanation- Technological advancement increases consumer surplus. This increase
in consumer surplus is because of the decrease in price resulting from an increased
supply of products at any given price level. Additional purchase of product due to
increased supply will be of decreasing utility or benefit to the consumers (Marginal
Utility of a consumer decreases as he/she purchases more and more quantity of a
product, until a satisfaction level is reached at which MU = 0).

Q2. If due to government efforts, there is an initial change in total spending in the
chinese economy, then it will have the smallest overall short run effect on total
expenditure if -
A. Imports are large, Savings are high and Government expenditure is also high.
B. Imports are small, Savings are high and Government expenditure is low.
C. Imports are small, Savings are low and Government expenditure is also low.
D. Imports are large, Savings are low and Government expenditure is high.
Correct Answer- A
Explanation- Due to government efforts an initial increase in total spending will have
the smallest overall short run effect on total expenditure if -
1. Savings exceed consumption
2. Imports are large in comparison to exports so that domestic spending on goods is
low.
3. Government expenditure forms a higher proportion of total spending.

31
Q3. Suppose due to technological advancement, employers in China reduce their
number of existing employees so that they can hire newly skilled workers. What do
you think- are the fired employees unemployed and if yes, then what type of
Unemployment?
A. Yes, Structural Unemployment
B. No, they are not unemployed
C. Yes, frictional unemployment
D. More information required
Correct Answer- C
Explanation- Frictional unemployment refers to the unemployment time period
where workers are searching for a job or are in the process of transition from one job
to another. Hence, frictional unemployment can be experienced even in a growing
economy. Thus, the fired employees are unemployed but for a time period until
which they are able to find new work.

Directions Q4-6
Case 2- A condition where a person is deprived of minimum standard of living and
challenges human dignity and world peace is defined as “Poverty”. But with
economic development comes economic prosperity and thus, for the first time in
the history of mankind, most people who live in this World are no longer poor.
According to the Brookings Institute and World Data Lab’s estimates (2018), 50% of
the world’s population belong to the middle class or wealthy accommodations. As
per 12th President of the World Bank, Jim Yong Kim - “Over the last 25 years, more
than a billion people have lifted themselves out of extreme poverty, and the global
poverty rate is now lower than it has ever been in recorded history. This is one of the
greatest human achievements of our time”.
The highly developed and developing economies of the world are even showing a
positive correlation between economic growth and environmental awareness. As
per Steven Pinker - “Again and again, environmental improvements once deemed
impossible have taken place. Since 1970, when the Environmental Protection
Agency was established, the United States has slashed its emissions of five air
pollutants by almost two-thirds. Over the same period, the population grew by more
than 40%, and those people drove twice as many miles and became two and a half
times richer”. European Union reduced its CO2 emissions by 54% between 1991 and
2014. Over the past 4 decades even China (one of the worst exploitant of coal) has
reduced CO2 emissions by 75%. Efficient allocation of resources and technological
development has driven more environmental awareness and protection. Today
more than 15% of the surface of the planet is protected.
Based on the above case study, answer the questions given below-

Q4. In Japan, due to declining world poverty rates and a broadening economy,
new competitors are entering the market of a monopolistic competitive firm. What
two changes are likely to happen to the individual demand curve of that
monopolistic competitive firm?
A. Shift right and become more elastic
B. Shift left and become more elastic
C. Shift right and become less elastic
D. Shift left and become less elastic
Correct Answer- B
Explanation- When new competitors are entering the market of a monopolistic
competitive firm, the downward sloping demand curve of a monopolistic

32
competitive firm becomes more elastic because of an increase in the supply of
differentiated products and hence the demand curve shifts to left, decreasing the
price.

Q5. Suppose “economic growth” and “poverty” are two goods. The above case
study by the World Bank Report depicts a negative cross price elasticity of demand
between economic growth and poverty, then it can be inferred that-
A. Both economic growth and poverty are purchased together
B. Both economic growth and poverty are not purchased at all.
C. Both economic growth and poverty are not purchased together
D. More information required
Correct Answer- A
Explanation- A negative cross price elasticity of demand indicates that two goods
are complementary which means that an increase in the price of one good
decreases the demand for the other. Hence, “Economic growth” and “poverty” are
complementary goods according to question and thus, have a negative cross price
elasticity of demand.

Q6. According to Robert Shiller, what was one of the causes behind U.S. Poverty?
A. Ecological Fallacy
B. Mass Incarceration
C. Flawed Character
D. All of the above
Correct Answer- C
Explanation- According to Robert J. Shiller, Big Brother Theory, Flawed Character
and Restricted Opportunity are the three main causes of poverty in the United
States. Flawed Character refers to people’s or particularly employers’ perception
about a community or class. For example - they may believe that children belonging
from black families never complete their homework. This assumption of behaviour
results in increased unemployment and hence, poverty.

Unsolved Questions
Directions Q1-3
Case 1- According to the World Tourism Organisation, tourism refers to travelling to
and staying in places outside the usual environment for not more than one
consecutive year. With increased mobility among nations as well as within nations,
the tourism industry has been booming with 1.36 billion international arrivals in 2017.
Globally, travel and tourism directly contributed approximately $2.9 trillion to GDP in
2019. The following map shows tourism arrivals across select nations in 2018.

33
Q1. As shown in the map, European countries have typically seen higher tourists. In
this regard, what do you think holds true for European countries as compared to
other countries?
A) Demand for foreign currency is higher
B) Supply of foreign currency is higher
C) Supply of domestic currency is higher
D) Both A and C

Q2. Tourism income forms a part of which of the following?

A) Factor Income from Abroad
B) Factor Income to Abroad
C) Domestic Income
D) International Income

Q3. Which of the following advantages of tourism directly contributes to economic

well being of the host nation?
A) Livelihood for people
B) Cultural and Ethnic Collaborations
C) Knowledge Expansion
D) Improves Country’s reputation

Directions Q4-6
Case 2- The dot-com bubble was one of the biggest stock market crashes in recent
history, caused by the excessive speculation in internet based companies in the late
1990s. Between 1995 and March 2000, the Nasdaq Composite Market Index rose
400% only to fall 78% from its peak by October 2002. It was the cause for the shut
down of many companies such as Pets.com, Webvan and Boo.com.

Q4. What cannot be a possible measure to come out of the dot-com bubble
induced recession?
A) Buying of open market securities by the Federal Reserve
B) Decrease in Repo Rate
C) Increase in Cash Reserve Ratio
D) Decrease in Reverse Repo Rate

Q5. What led to the massive surge in the Nasdaq Composite Market Index?
A) Increased demand for Internet Stocks
B) Decreased demand for internet stocks
C) Increased supply of internet stocks
D) Decreased supply of internet stocks

Q6. Does the dot com bubble follow the law of equilibrium.
A) Yes, because increased demand led to the decreased stock prices.
B) No, because in equilibrium, markets would have remained stable.
C) Yes, because decreased demand led to fall in stock prices.
D) No, because stock markets aren’t desired by the public at large and thus,
can never be at equilibrium.

34
Directions Q7-9
Case 3- In a distant country called Naviaxainia, there are only four firms, namely
Accor ltd., Beat ltd., Crobeau ltd. and Drenio ltd., which dominate the market for
mobile phones. All these companies have strongly maintained their position so as to
not to allow any other player onto the market. Moreover, the market share of each
of them is almost similar, with Accor at 27%, Beat at 23%, Crobeau at 24% and Drenio
at 26%. There exist serious impediments to entry for new firms, hence the mobile
phones market works entirely under the aegis of these 4 firms only. On the basis of
the above information, solve the following questions-

Q7. Which three of the following characteristics apply to the type of market that is
indicated above?
I. A few large firms account for a high percentage of industry output
II. Many small firms account for a high percentage of industry output
III. Each firm faces a horizontal demand curve
IV. Each firm faces a downward sloping demand curve
V. The industry is often characterised by extensive non-price competition
Options:
A. I, III, V
B. II, III, IV
C. I, IV, V
D. I, II, III

Q8. Which two of the following assumptions are essential parts of the 'kinked
demand' curve analysis of the above market?
I. Rivals raise prices in response to any price increase
II. Rivals reduce prices in response to any price decrease
III. Rivals reduce prices in response to any price increase
IV. Rivals do not react to any price increase
V. Rivals do not react to any price decrease
Options:
A. I, III
B. II, III
C. II, IV
D. III, V

Q9. Which of the following sentences is false-

A. Each of the above-mentioned firms can earn greater profits if they collude,
rather than engaging in a price competition
B. Product differentiation and advertising can be good strategies
C. Accor can reduce its prices drastically in order to enhance the demand for its
mobile phones
D. All are correct

Directions Q10-11
Case 4- Food prices often rise or fall with good or bad harvests or because of a
change in demand. A recent example is the price of brazil nuts, which by May this
year had risen over 60% on European markets. Part of the reason for the price rise
has been on the demand side. Consumption of brazil nuts has increased as more
people switch to healthier diets. This includes the purchase of the nuts themselves
and as part of healthier snack foods. With supply being relatively inelastic, any rise in

35
demand tends to have a relatively large effect on price. A more acute reason is on
the supply side. There has been a very poor harvest of Brazil nuts. The nuts are grown
largely in the Amazon basin which has been hit by drought linked to the El Niño
effect. This, however, is only a temporary effect and future harvests should increase
again as rainfall returns to normal. The price rise in the UK has also been aggravated
by the depreciation of the pound since the Brexit vote, which has fallen some 13%
against the dollar since June 2016. A rise in the dollar price of Brazil nuts has thus led
to an even bigger rise in their sterling price.

Q10. Which of the following is not a reason for the rise in prices of nuts?
A. A rise in market demand by brazilians in anticipation of becoming healthier
B. The lack of ability of market to immediately respond to the rise in demand
C. Depreciation of the currency leading to inflation
D. An increase in demand followed by an increase in supply by the farmers

Q11. Which of the following is true for depreciation of currency?

A. It affects the exports negatively
B. It improves the current account deficit
C. It affects the tourism industry negatively
D. All of the above

Answers:

1. B 2. C 3. A 4. C 5. A 6. C
7. C 8. C 9. C 10. D 11. B

36
 National Economics Olympiad 2019
Preliminary Level Exam: Class XI

Section I: Economic Concepts

Q1. Tom gets x as pocket money every month. Regardless of anything, he spends
1/4th of this pocket money on Ice Cream (assumed to be an infinitely divisible
good). What is the price elasticity of Tom’s Demand for the Ice Cream? (Other things
remaining constant, price elasticity measures the impact of change in quantity
demanded of a commodity as a result of change in its own price.)
A. 0
B. 1
C. 0.5
D. Infinite

Q2. A currency crisis is a situation where a country tends to run out of the foreign
exchange reserves it has. In the context of India, which of the following factors is/are
contributor/contributors to reducing the risk of a currency crisis?
I. The earnings of India’s outsourcing sector received from abroad
II. Increasing the government expenditure.
III. Remittances from Indians abroad. Select the correct answer using the code given
below.
A. 1 only
B. 1 and 2 only
C. 2 only
D. 1, 2 and 3 only

Q3. According to economists which of the following argument is true:

A. Monopoly causes a fall in the welfare of the public.
B. Inflation leads to a rise in the wages of employees
C. Inflation is bad for the economy.
D. A and B both.

Q4. Marginal Cost (or MC) refers to the additional cost incurred by a producer when
he produces one more unit of his output. Mathematically it is - the change in total
cost divided by change in the number of units produced. When a train with a
seating capacity of 600 passengers is carrying only 550 passengers, the MC of
carrying an additional passenger would be equal to
A. Cost of a passenger ticket.
B. Cost of providing services to the new passenger.
C. Zero because there is excess seating capacity in the train.
D. Cost of 49 seats which have not been filled

37
Q5. A consumer always wishes to pay the least amount for a product. The lower they
pay for a product, the higher is their surplus. Assume that a consumer is willing and
able to pay $5 for a latte and that the price of the latte is $3.Which of the following is
equal to the surplus enjoyed by the consumer?
A. $8
B. $2
C. $15
D. $1

Q6. Depreciation of a currency refers to a fall in the value of that currency as

compared to another currency, whereas appreciation of a currency refers to a rise
in the value of that currency as compared to another currency. For example -
Assume 70 rupees are required to make 1 dollar. Now, if 75 rupees are needed to
make a dollar, it would be said that the rupee has depreciated. If 65 rupees are
needed to make a dollar, the rupee would have appreciated. If -
I. Indian Rupee is depreciating against the dollar
II. Sri Lankan Rupee is appreciating against the dollar. How are the following
statements related-
A. Both are independent statements
B. Statement I is a reason of statement II
C. Statement I is a cause of statement II
D. Inadequate data to determine whether a relationship exists or not

Q7. Which of the following is NOT a factor of production?

A. The wages paid to the workers.
B. The efforts put in by an entrepreneur to raise capital
C. The water used to cool a nuclear power plant
D. The management skill of a small business owner

Q8. A free economy is a system where there is no/negligible government control

influenced as the forces of demand and supply decide the market price of goods
and services. In such an economic system, if inequalities in income prevail, what
among the following can be a reason for such inequalities?
A. Free competition
B. Private property and inheritance
C. Differences in the marginal productivity of labour
D. Private property only

Q9. Last year India saw an exponential growth in tourism with a 15% growth in
foreign tourists and 25% in foreign tourist spending in India. What would this likely lead
to in the current year?
A. Increase in Imports
B. Increase in exports
C. Increase in both imports and exports
D. No change in imports and exports

38
Q10. Economic slowdown in some parts of the world has adversely affected
demand for Indian exports. What will be its effect on India's capacity to produce?
A. Production capacity will remain unchanged
B. Production capacity will increase
C. Production capacity will decrease
D. None of the above

Section II: Logical Reasoning

Q11. Look at the sentences that are given below:

I. If the contract is valid, then X is liable.
II. If X is liable, he will be bankrupt.
III. If the bank loans him money, he will not go bankrupt. Select the statement that is
consistent with the above statements:
A. The contract is valid and the bank will loan him money.
B. The contract is valid and the bank will not loan him money.
C. The contract is not valid and he will go bankrupt.
D. The contract is not valid and he is liable.

Q12. In all family photos, if Ramu is present, his two brothers are also present. A
certain photo features five members of his family. Among the people in that photo
are a set of parents with their daughter. Which of these statements is necessarily
true?
A. Ramu is present in the photo
B. Ramu is absent from the photo
C. Ramu may or may not be present in the photo
D. None of these

Q13. 3 couples sit on an oval bench where none of the couples are sitting adjacent
to each other. The males are Rakesh, Rajesh and Suresh, while the females are Rani,
Rosy and Surbhi. They sit in the following manner:
I. Suresh sits between Rani and Surbhi
II. Rakesh sits to the right of Ramesh
III. Rosy sits between Ramesh and Surbhi
Who is Rakesh's wife?
A. Surbhi
B. Rosy
C. Rani
D. None of the above

Q14. John has 3 sacks containing 10 coconuts each. He is taking these to a different
state and is required to pay toll tax at 9 poll booths. He is required to pay 1 coconut
as toll tax for every sack of coconut he is carrying with him. How many does he have

39
left with him at the end of the journey? (Assume that no tax has to be paid for empty
sacks)
A. 6
B. 8
C. 10
D. None of the above

Q15. How many pairs of letters are there in the word SECURITY each of which has as
many letters between them as there are in the English alphabetical series?
A. 2
B. 3
C. 4
D. More than 4

Section 3: Case Studies

Directions Q16-Q18
Case 1- The proposed Regional Comprehensive Economic Partnership (RCEP) is
gigantic in size and scope. It aims to create a free trade zone of 10 ASEAN nations
and Australia, China, India, Japan, South Korea and New Zealand. This means a
zero-customs duty zone in geography that contributes 34% of global gross domestic
product (GDP) and 40% of world trade. The region is also home to almost half of the
world’s population. Currently, many pharmaceutical companies have to obtain
elaborate licenses to export their goods to China. The government hopes to change
this. However, many analysts believe that there would be little for India to gain from
this agreement. Many industries like steel are also worried that cheap imports from
China would harm their business, as the cost of producing steel in India is higher than
that in China.

Q16. What would happen if Government of India creates a Special Economic Zone
(SEZ) for steel manufacturers in Manesar? (Where SEZ is a designated area in which
the business laws are more relaxed to encourage trade and manufacturing
activities.)
A. Maruti Suzuki's manufacturing plant will increase its import of steel.
B. Maruti Suzuki's manufacturing plant will decrease its import of steel.
C. Cannot say
D. None of the above.

Q17. What would happen if INR becomes weaker/depreciates with respect to

Yuan? (Depreciation implies a fall in the value of Indian Rupee in comparison with
Yuan. For example, when earlier 10 rupees made a yuan, after depreciation, we
need 15 rupees to make a yuan)
A. Exports of steel to China would increase.
B. Exports of steel to China would decrease.

40
 C. Imports of steel from China would decrease.
D. Both A & C

Q18. An Intellectual Property case has been put forth by Japan in order to protect its
pharmaceutical industry, which of the following is likely to happen after the RCEP
Agreement is struck:
A. India’s export of medicines will rise.
B. India’s export of medicines will fall.
C. India's export of medicines may or may not change.
D. None of the above

Directions Q19-Q21
Case 2- Alphabet Inc’s Google moved $19.2 billion to a Bermuda shell company in
2016, regulatory filings in the Netherlands show -- saving the company billions of
dollars in taxes that year. Google uses two structures, known as a “Double Irish” and
a “Dutch Sandwich,” to shield the majority of its international profits from taxation.
The setup involves shifting revenue from one Irish subsidiary to a Dutch company with
no employees, and then on to a Bermuda mailbox owned by another Ireland-
registered company. Google is under pressure from regulators and authorities
around the world for not paying enough tax. In 2017, the company escaped a 1.12
Billion Euro French tax bill after a court ruled in its Irish subsidiary, which collects
revenue for ads the company sells in France, which had no permanent base in the
country.

Q19. What would happen if Google does not engage in such activities?
A. Tax receipts of the Government will decrease
B. Tax receipts of the Government will increase
C. Tax receipts of the Government would remain the same
D. None of the Above

Q20. What is the nature of the strategy which was used by Google in the given
case?
A. Tax Evasion
B. Tax Avoidance
C. Tax Appropriation
D. None of the Above

Q21. What should the government NOT do to curb such activities by a large
corporate like Google?
A. Reduce overall tax rate for better compliance
B. Implement stringent International Tax Laws
C. Increase tax rate on defaulting companies
D. Make all Tax Payable data of the corporate public to induce Public Pressure
for higher and efficient payment of taxes

41
Direction Q22-Q24
Case 3- The Intergovernmental Panel on Climate Change (IPCC) has reported to
the United Nations that the Earth's climate system is undoubtedly getting warmer
and concluded that it is more than 90 percent likely that the accelerated warming
of the past 50-60 years is due to human contributions. As the levels of carbon dioxide
(CO2) and other greenhouse gasses increase, more heat is “trapped” in the earth's
atmosphere and global temperatures rise. Suppose a large city has several power
stations which all emit CO2. The government wants to reduce CO2 emissions but
knows that it will cost some power stations more than others to reduce their
emissions.

Q22. In order to secure the most reduction from the stations which would find it
cheapest to cut back, which of the following policies would be best?
A. A regulation limiting how much CO2 a power station can emit per megawatt
of electricity generated
B. A tax on electricity
C. A tax on emissions of CO2
D. Giving power stations the property right to emit CO2, and relying on people
affected to bribe them to cut back

Q23. Suppose the government wishes to reduce the overall CO2 emissions. Which of
the following policies would be best?
A. A regulation limiting how much CO2 a power station can emit per megawatt
of electricity generated.
B. A tax on electricity.
C. A tax on emissions of CO2.
D. Giving power stations the property right to emit CO2, and relying on people
affected to bribe them to cut back.

Q24. When the Government decides to tax the power stations it assumes that the
price elasticity of electricity is:
A. Inelastic
B. Unit Elastic
C. Elastic
D. Perfectly elastic

Directions Q25-Q27
Case 4- In a bold move to reverse the economic downturn and make India an
attractive investment destination, finance minister Nirmala Sitharaman slashed
corporate tax rates worth 1.45 trillion paid by domestic manufacturers, making the
country one of the lowest tax regimes in Asia. Manufacturing companies not availing
of tax sops can now opt for a 22% corporate tax rate, while new manufacturing
companies that register and start production between 1 October and March 2023
can avail an even lower tax rate of 15%. At present, business income is taxed at 30%,
exclusive of cess and surcharge, other than in the case of companies with sales of

42
up to 400 crore and new manufacturing companies which are taxed at 25%. Now,
the effective tax rate, including cess and surcharges, for the existing companies
comes down from 34.94% to 25.17%, while for new companies, it falls from 29.12% to
17.01%.

Q25. What effect will this reduction in corporate tax have on the fiscal deficit of the
country in the short run? Note: Fiscal Deficit is the difference between the total
revenue and the total expenditure of the government.
A. Fiscal deficit will rise.
B. Fiscal deficit will fall.
C. Fiscal deficit will remain unchanged.
D. Fiscal deficit may rise, fall or stay constant.

Q26. The benchmark Sensex rose 5.09%, or 1837.52 points, to 37,930.99, while Nifty 50
was up 526.15 points, or 4.92% at 11,230.95 points. Why did this happen?
A. Subsequent rise in net profits of companies.
B. Fall in prices of equities.
C. Rise in price of equities.
D. Rise in real income of individuals

Q27. What impact will this news have on supply curve in the short run?
A. It will shift to the right.
B. It will shift to the left.
C. There will be no change in the supply curve.
D. Any of the above is possible.

Directions Q28-Q30
Case 5- In franchising a franchisor licenses its know-how, procedures, intellectual
property, use of its business model, brand, and the rights to sell its branded products
and services to a franchisee. When we talk about companies using this business
model the name of Subway comes at the forefront. With 42,000 stores, Subway is the
largest franchise owner on the planet, one of the primary reasons for this being that
it's cheaper to own a subway franchise than any other fast food chain. In the
financial crisis of 2008 when the entire USA faced a recession Subway witnessed a
17% growth because of its 5$ footlong. But this 5$ footlong became a problem for
the company in the long run. But in recent years the company has witnessed a
slowdown in growth and a 25% decline in its business. One of the major reasons for
this is lack of innovation in the menu in recent years as compared to other chains.
Also Subway has no restrictions on where one can open a franchise because of
which we find about 10 Subways in a 15 minute walk in Manhattan.

Q28. Why has more franchises become a bad thing for Subway?
A. The franchises are competing with each other, and there has been saturation
B. Because they are selling the franchise agreements at a very low price
C. Because of a decline in quality of individual franchise

43
 D. Subway incurs a lot of cost on opening a new franchise

Q29. Why do you think the 5$ footlong became a problem for Subway in the long
run?
A. Customers got bored of the product
B. Other fast-food chains provided cheaper alternatives
C. Due to inflation profit margins declined over time
D. Demand for the product fell because of a recession.

Q30. What should the subway do to avoid the impending slowdown in the
company?
A. Reduce the number of franchises
B. Increase the number of franchises to increase revenue and thus profits
C. Increase the one-time fee and royalty on new franchises
D. Enter a new market to increase sales.

Section IV: Data Interpretation

Directions Q31-32
Set 1- If the firms in the Automobile industry have the following market shares:

Company % of Market
Tata Motors 18.6
Mahindra and Mahindra 15.7
Toyota 9.8
Maruti Suzuki 15
Hero Motorcorp 12.4
BMW 7.8
Others 20.7

Q31. Which market structure would best describe the industry?

A. Monopolistic Competition
B. Oligopoly
C. Monopoly
D. Perfect Competition

Q32. Assume that Maruti Suzuki acquires all other companies & starts selling cars
under its own brand name. Now the market structure is described as:
A. Monopoly
B. Monopolistic Competition
C. Perfect Competition
D. Oligopoly

Directions Q33-Q34
Set 2- Answer the following questions on the bar diagram below:

44
Q33. Which event in the economy led to a sharp fall in Indian exports in November
2016?
A. WTO imposed economic sanctions on India
B. The Indian currency dramatically appreciated
C. The Indian government removed illegal money from the system
D. The Indian government closed many manufacturing units

Q34. What will the Indian government not do to cover the trade deficit? (where
trade deficit is the situation of an excess of imports as compared to exports)
A. Depreciate Indian Rupee with respect to US dollar
B. Increase subsidies given to export industries
C. Appreciate Indian rupee with respect to dollar
D. Increase import duties

Directions Q35-Q36
Set 3- A Consumer Price Index measures changes in the price level of a selected
market basket of consumer goods and services purchased by households. There are
other price indices like the wholesale price index that measures changes in the price
level of a selected market basket of wholesale products and the producer price
index that measure the changes in the price level of a selected market basket of
producer goods.

45
Q35. Which of these may not be a cause of an increase in CPI?
A. Increase in GST on raw materials
B. Increase in demand
C. Depreciation of Indian currency
D. Rise in WPI

Q36. A Consumer Price Index measures changes in the price level of a selected
market basket of consumer goods and services purchased by households. There are
other price indices like the wholesale price index that measures changes in the price
level of a selected market basket of wholesale products and the producer price
index that measure the changes in the price level of a selected market basket of
producer goods. Which of these is a false statement?
A. Rural Demand Falls due to low Rural CPI
B. Price rise due to quality enhancement of a product is not considered by CPI
C. CPI directly impacts the consumers
D. There is a perfect correlation between the Wholesale Price Index and CPI.

Directions Q37-Q38
Set 3-

Q37. What rate of economic growth is estimated by the Government of India by the
following graph in the 2nd quarter of financial year 2020?
A. 6%
B. 8%
C. 10%
D. Cannot say

Q38. In which year was the inflation highest in the economy?

A. 2015
B. 2016
C. 2018
D. 2019

46
Directions Q39-Q40
Set 4- You are the manager of a firm that sells output at a price of $40 per unit. You
are interested in hiring a new worker who will increase your firm's output by 2,000
units per year. Several other firms also are interested in hiring this worker.

Q39. What is the most you should be willing to pay this worker to come to your firm?
A. 80000
B. Less than 80000
C. More than 80000
D. Information is not relevant

Q40. How much will you actually have to offer the worker to induce him to join your
firm if his opportunity cost is $60000?
A. 60000
B. Slightly more than 60000
C. 80000
D. Slightly more than 80000

Answers:

1. B 2. B 3. D 4. C 5. B 6. A 7. A 8. B
9. A 10. A 11. B 12. C 13. A 14. C 15. B 16. C
17. D 18. C 19. B 20. B 21. D 22. C 23. B 24. A
25. A 26. A 27. C 28. A 29. C 30. A 31. A 32. A
33. C 34. C 35. D 36. D 37. D 38. C 39. A 40. B

47
 National Economics Olympiad 2019
Preliminary Level Exam: Class XII

Section I: Economic Concepts

Q1. Which among the following statement is INCORRECT?

A. On a linear demand curve, all the five forms of elasticity can be depicted.
B. If two demand curves are linear and intersecting each other, then the
coefficient of elasticity would not be the same at the point of their
intersection.
C. If two demand curves are linear and parallel to each other, then at a
particular price the coefficient of elasticity would be different on different
demand curves.
D. The price elasticity of demand is expressed in terms of relative not absolute,
changes in price and quantity demanded.

Q2. The price of commodity X increases from Rs.50 to Rs.70, but its quantity
demanded also increases from 3 units to 4 units. How is this possible?
A. X is an inferior good.
B. The income effect and substitution effect for X act in opposite directions and
the income effect is much greater than the substitution effect.
C. The income effect and substitution effect for X act in opposite directions and
substitution effect is much greater than the income effect.
D. Both A and B.

Q3. In 2002, the Atkins diet, which emphasized eating more meat and fewer grains,
became very popular. What do you suppose that did to the price and quantity
demanded of bread?
A. Rise in price and fall in quantity demanded of bread
B. Rise in price and rise in quantity demanded of bread
C. Fall in price and rise in quantity demanded of bread
D. Fall in price and fall in quantity demanded of bread

Q4. What is the impact of excess demand or over full employment equilibrium on the
output and employment in an economy?
A. Increase in employment, increase in output
B. Increase in employment, no change in output
C. No change in employment and output
D. Increase in employment, increase in output

Q5. Tom gets ‘x’ as pocket money every month. Regardless of anything, he spends
1/4th of this pocket money on Ice Cream (assumed to be an infinitely divisible
good). What is the price elasticity of Tom’s Demand for the Ice Cream?

48
 A. 0.25
B. 1
C. 0.50
D. Infinity

Q6. There are two commodities, a normal one (P) and an inferior one (Q). A
consumer’s income increases, which shifts the budget line from B to B’. What shall be
the new equilibrium point on the Indifference map?

A. X
B. Y
C. Z
D. None of the above

Q7. Which of the following situations does not lead to an increase in equilibrium
quantity, assuming that demand and supply are not perfectly elastic or inelastic?
A. An increase in demand accompanied by an unequal increase in supply.
B. A decrease in demand accompanied by a proportionately equal increase in
supply.
C. An increase in demand accompanied by a proportionately equal increase in
supply.
D. A decrease in demand accompanied by a proportionately equal decrease
in supply.

Q8. One of the homebuyers sold his house costing Rs 5 crore to another person for Rs
8 crore. The broker charged a commission of Rs 30 lakh on the sale. What should be
the amount included while calculating national income?
A. 8.3 crore
B. 5.3 crore
C. 3.3 crore
D. 0.3 crore

49
Q9. Suppose that one year a country had a balance of trade deficit. Also, suppose
that the balance for invisibles was zero. Then which of the following statements is
false?
A. Current account deficit must be equal to the trade deficit.
B. Autonomous receipts are less than autonomous payments.
C. There must have been a deficit on the capital account.
D. There must have been a surplus on the capital account.

Q10. What would be the impact of corporate tax reduction on supply in the short
run?
A. Supply will not change in the short and long run.
B. Supply increases in the short run.
C. Supply will not change in the short run.
D. Supply sharply increases in the short run then gradually falls.

Section II: Logical Reasoning

Q11. Look at the sentences that are given below.

1) If the contract is valid, then X is liable.
2) If X is liable, he will be bankrupt
3) If the bank loans him money, he will not go bankrupt.
Select the statement that is consistent with the above statements
A. The contract is valid and the bank will loan him money.
B. The contract is valid and the bank will not loan him money.
C. The contract is not valid and he will go bankrupt.
D. The contract is not valid and he is liable.

Q12. In all family photos, if Ramu is present, his two brothers are also present. A
certain photo features five members of his family. Among the people in that photo
are a set of parents with their daughter. Which of these statements is necessarily
true?
A. Ramu is present in the photo
B. Ramu is absent from the photo
C. Ramu may or may not be present in the photo
D. The two brothers of Ramu are present in the photo

Q13. 3 couples sit on an oval bench where none of the couples are sitting adjacent
to each other. The males are Rakesh, Ramesh and Suresh while the females are Rani,
Rosy and Surbhi. They sit in the following manner:
1) Suresh sits between Rani and Surbhi.
2) Rakesh sits to the right of Ramesh.
3) Rosy sits between Ramesh and Surbhi.
Who is Rakesh's wife?
A. Rosy

50
 B. Rani
C. Surbhi
D. None of the above.

Q14. John has 3 sacks containing 10 coconuts each. He is taking these to a different
state and is required to pay toll tax at 9 poll booths. He is required to pay 1 coconut
as toll tax for every sack of coconut he is carrying with him. How many does he have
left with him at the end of the journey?
A. 6
B. 8
C. 10
D. None of the above.

Q15. How many pairs of letters are there in the word SECURITY each of which has as
many letters between them as there are in the English alphabetical series?
A. 2
B. 3
C. 4
D. None

Q16. How many pairs of letters are there in the word SECURITY each of which has as
many letters between them as there are in the English alphabetical series?
A. 2
B. 3
C. 4
D. None

Section III: Data Interpretation

Set 1- Answer the following questions based on the graph given below:

Q17. What do you think is the most likely condition of the Japanese economy from
1992-1995?

51
 A. The economy was slowing down.
B. The economy was booming.
C. The economy was stable.
D. None of the above

Q18. What effect may the low interest rates have on Financial Institutions in the long
run?
A. People start depositing more in Financial Institutions
B. Financial Institutions increase lending to the public
C. Financial Institutions are taken over by the Central bank after incurring huge
losses
D. None of the above

Set 2- The graph given below shows the Reverse Repo rate in India:

Q19. The RBI is regularly revising downwards the repo & reverse repo rates. Why is this
being done?
A. To check inflationary pressures in the economy.
B. To curb the growth of black money.
C. To increase demand and private consumption.
D. To make bank loan costlier

Q20. When the repo rate is increased by RBI, it directly leads to:
A. Reduction of cost to borrowers on loans from banks
B. Increase in the cost of loans to borrowers from banks.
C. Reduction in the cost of borrowing by banks from RBI.
D. Increase in the cost of borrowing by banks from RBI.

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Set 3-

Q21. What does the diagram above indicate about the trade balance of India?
A. Trade balance was negative.
B. Trade balance was positive
C. Trade balance was neutral.
D. None of the above

Q22. What will the Indian government not do to cover the trade deficit?
A. Depreciate Indian Rupee with respect to US dollar.
B. Increase subsidies given to industries.
C. Appreciate Indian rupee with respect to dollar.
D. Increase import duties

Set 4-

Q23. Which of these problems, faced by countries like Nigeria and DR Congo, is not
caused by an increase in the number of people living in extreme poverty?
A. Fall in the GDP per capita in the long run
B. Inflation in the economy
C. Wider income inequality

53
 D. Fall in investments

Q24. Which of the following parameters does not play a significant role in
determining the standard of living?
A. Sanitation
B. Education
C. Employment Opportunities
D. Healthcare

Set 5-

Q25. What is the relation between inflation and economic growth?

A. High inflation leads to high economic growth.
B. High inflation leads to a fall in economic growth.
C. There is no connection between the two.
D. The connection cannot be determined.

Q26. How can the government reduce inflation?

A. Increase the interest rates.
B. Increase the minimum wage rate.
C. Reduce income tax rates
D. Devalue the currency

Section IV: Case Studies

Directions Q27-28
Case 1- Assume there is a well-defined geographic area of a city. The area is
composed exclusively of apartments and is populated by low-income residents. The
people who live in the area tend to stay in that area because:
1) They cannot afford to live in other areas of the city,

54
2) They prefer to live with people of their own ethnic group
3) There is discrimination against them in other areas of the city. Rents paid are a
very high percentage of peoples' incomes.

Q27. Now assume the government creates a rent supplement program. Under this
program, the rentee is required to pay 30% of income in rent. Any additional rent is
paid by the government. For example, a low-income person with an income of
$1,000 a month would be required to pay $300 in rent (30%). If the rent is $500, the
other $200 would be paid by the government. Analyze the results of this program on
the rent of the apartments:
A. Rent remains the same as both demand and supply are inelastic.
B. Rent falls as income rises of rent payer and supply is inelastic.
C. Rent rises as income rises of rent payer and supply is inelastic.
D. Rent falls as supply and demand are both relatively elastic.

Q28. Instead, now assume that the government decides to provide a building
subsidy to people who build apartments in this low-income area. A certain
percentage of their costs will be paid by the government. Analyze the results of this
program on the rents of apartments:
A. Rent falls as the supply of apartment increases and demand is inelastic.
B. Rent falls as demand for apartment decreases and supply is elastic.
C. Rent remains same as there is proportionate change in demand & supply of
apartment
D. Rent rises as with subsidy there is a drastic increase in demand of the
apartment.

Directions Q29-31
Case 2- Vietnam is a country situated in Southeast Asia which is famous for its
beaches, rivers and cities. The economy of Vietnam witnessed marvellous growth
rates from 2000 to 2007. But by 2008 the economy started slowing down. The global
financial crisis of 2008 further aggravated the situation. Vietnam was facing financial
problems like that of trade deficit. Thus, the State Bank of Vietnam undertook a series
of measures, the prominent one being devaluation of Vietnamese currency- The
Dong; in order to deal with the problems that the country was facing.
Based on the above answer the following questions:

Q29. What aim must not have guided the State Bank of Vietnam to devalue
Vietnamese currency- Dong?
A. Increase the Foreign Exchange Reserves of Vietnam.
B. Control the trade deficit.
C. Encourage imports in Vietnam.
D. None of the above.

Q30. Consider that Chinese Yuan had been devalued last year. Still, Vietnam
devalues the dong. What would happen?

55
 A. Chinese goods would have flooded the Vietnamese markets.
B. Exports from Vietnam would decline.
C. Public debt would reduce along with a reduction in inflation.
D. Exports from Vietnam would rise.

Q31. Devaluation of currency generally leads to:

A. Fall in domestic prices.
B. No impact on domestic prices.
C. Increase in domestic prices.
D. Erratic fluctuation of domestic prices

Directions Q32-34
Case 3- The United States imposed sanctions targeting the oil, energy, banking,
metals, and shipping industries last year after withdrawing from the landmark 2015
nuclear agreement that had given Iran sanctions relief in exchange for measures
aimed at preventing it from obtaining materials that could be used to produce a
nuclear weapon. Since then, the US has imposed more sanctions in retaliation to the
retaliatory moves of Iran. Oil exports, Iran’s main source of income, have fallen 80%
since the sanctions were put into place, and the International Monetary Fund
predicts that Iran’s economy will shrink by 6% this year. Iran controls 40% of the
world’s oil supply. The sanctions have been felt heavily on the streets of Iran. No
longer able to afford fresh food, some Iranians in middle-class neighborhoods in
Tehran have resorted to buying withered fruits and vegetables. Iran’s “resistance
economy,” is guiding the government of Rouhani.

Q32. What will the Rouhani government not do mitigate the crisis in the economy?
A. Borrow loans from the World Bank and IMF.
B. Decrease domestic production and increase imports.
C. Increase trade with neighboring countries.
D. Decrease government expenditure

Q33. What should happen to the price of Oil after the sanctions in the short run?
A. The price of oil increases.
B. The price of oil decreases.
C. The price of oil remains the same.
D. None of the above.

Q34. What is the most direct impact of a sharp fall in exports of petroleum on Iran?
A. Surplus in balance of visible trade.
B. Fall in foreign exchange rate with respect to USD.
C. Fall in current account deficit.
D. Fall in foreign exchange reserves.

Directions Q35-47

56
Case 4- In 2010 the Greek government had to inform the European Commission on
how it would control its budget deficit and improve the performance of its
economy. The government’s debt is so high that agencies assessing the
creditworthiness of the government downgraded it (which would mean more
interest has to be paid to raise finance). Proposals were likely to include a 10% cut in
government spending.

Q35. What would be the effect if the government cut public spending by 10%?
A. Aggregate Demand will fall.
B. Budget Deficit will Increase.
C. Will reduce Recession.
D. Real GDP will increase

Q36. What actions can the government take to increase national income growth in
Greece?
A. Decrease interest rates on loan
B. Increase interest rates on loan
C. Increase Tax
D. Investment in Public Sector

Q37. If the Greek economy is in recession, what would you expect to be the effect
on Inflation?
A. High rate of Inflation
B. Hyperinflation
C. Stagflation
D. Cannot be determined

Directions Q38-40
Case 5- India’s battered automakers are dragging down jobs in allied industries as
well. Domestic passenger vehicle sales have been falling for nine months now,
according to data released by the Society of Indian Automobile Manufacturers
(SIAM) yesterday (Aug. 13). Sales in July fell 30.9% year-on-year, making it the worst
month for the industry in over 18 years. Car dealerships have cut down around
200,000 jobs in the last three months in response to the slump, according to Ashish
Harsharaj Kale, president of the industry group Federation of Automotive Dealers
Association. That is close to 8% of the total estimated workforce. Hundreds of
dealerships have also shut shop. Automobile component manufacturers have also
terminated between 10% and 15% of their estimated 5 million workforce, according
to Vinnie Mehta, director general at the Automotive Component Manufacturers
Association of India. The industry body has warned of 1 million job losses if sales don’t
pick up.

Q38. What do you think are the major reasons for the economic slowdown in the
automobile sector?
A. Muted consumer sentiment

57
 B. Credit crunch that has crippled lending in India’s non-banking financial
companies (NBFCs).
C. 28% goods and services tax (GST) levied on passenger vehicles.
D. All of the above

Q39. The government has reduced the repo rate. How do you think is it going to
affect the automobile sector?
A. Promote savings
B. A deflationary stance
C. Lesser borrowing by the general public
D. Incentive for greater borrowing and spending

Q40. What is the indirect implication of slowdown in the automobile sector?

A. Rising unemployment in industries supporting the automobile sector.
B. Fall in production of passenger vehicles.
C. Decreased revenue from the automobile sector.
D. None of the above

Answers:

1. B 2. D 3. D 4. C 5. B 6. A 7. B 8. D
9.C 10. C 11. B 12. C 13. C 14. C 15. B 16. B
17. A 18. B 19. C 20. D 21. A 22. C 23. B 24. C
25. B 26. A 27. C 28. A 29. C 30. D 31. C 32. B
33. A 34. D 35. A 36. A 37. D 38. D 39. D 40. A

58
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