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June 2023 Economics Paper-2

Question 1:
Match list I with list II

List I List II

A Central bank loss functions I

B Monetary Rule (MR) II

C Philips Curve (PC) III

D Dynamic IS curve IV

Table Supporting: June 2023 Economics Paper-2

Choose the correct answer from the options given below:

(1) A-II, B-III, C-IV, D-I
(2) A-III, B-II, C-IV, D-I
(3) A-IV, B-III, C-II, D-I
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(4) A-IV, B-III, C-I, D-II

Question 4: Suppose good 1 is taken on horizontal axis and good 2 on vertical axis, then
what happens to the budget line if the price of good 1 doubles and price of good 2 triples?
(1) the budget line becomes steeper
(2) the budget line becomes flatter
(3) the budget line becomes vertical
(4) the budget line remains unchanged
Question 8:
The Huasman՚s specification error test is used to test whether
(1) an exogenous variable is correlated with the error term
(2) an endogenous variable is correlated with the error term
(3) both an exogenous variable is correlated with the error term and an endogenous
variable is correlated with the error term
(4) OLS method is appropriate to estimate the SEM
Question 13:
Which of the following is/are true about paradox of thrift?
(A) Paradox of thrift was popularized by J. M. Keynes
(B) It states that personal savings can be detrimental to overall economic growth.
(C) it shows the relationship between output growth and rate of unemployment.
(D) it shows the relationship between inflation and rate of interest.
(E) It states that individuals saving during an economic recession leads to fall in aggregate
demand.
Choose the correct answer from the option given below:
(1) A, B, C only
(2) B, C, D only
(3) C, D, E only
(4) A, B. E only
Question 15:
Which of the following is not true in the case of second theorem of welfare economics?
(1) If consumers exhibit convex preferences, every pareto efficient allocation is a possible
competitive equilibrium in a pure exchange economy.
(2) In an economy involving production, the convexity of production sets ensures that a
pareto efficient allocation can be achieved as a market equilibrium.
(3) it holds when there are increasing returns to scale.

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(4) it implies that in the market system, the allocative role and the distributive role can be
separated from each other.
Question 17:
Which of the following is/are correct about Walrasian demand function?
(A) The Walrasian demand function is homogenous of degree zero if
for any P, W and .
(B) The Walrasian demand function is homogenous of degree one if
for any P, W and .
(C) The Walrasian demand function satisfies Walras law if for every and
, we have for all
(D) Walras law says consumer fully expends his wealth
(E) If price and wealth both change in same proportion, then individual consumption choice
does not change.
Choose the correct answer from the option given below:
(1) A, B, C, D only
(2) B, C, D, E only
(3) A, B, C, E only
(4) A, C, D, E only
Question 18:
Which of the following are not symptoms of multicollinearity in a regression model:
(A) High with few significant t ratios for coefficients
(B) High wise correlations among regressors pair
(C) The closer the Tolerance (TOLj) is to zero.
(D) Variance Inflation Factor (VIF) of a variable is below 10
(E) The closer the Tolerance (TOLj) is to 1.
Choose the correct answer from the option given below:
(1) C and D only
(2) D and E only
(3) A and C only
(4) B and D only
Question 28:
The BOP crisis of early 1990՚s made India borrow from the IMF which came on following
conditions:
(A) Devaluation of rupee by
(B) Drastic custom cut to a peak duty of from the erstwhile level of for all goods

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(C) Consolidation of all indirect taxes into one tax

(D) Excise duty to be increased by to neutralize the loss of revenue due to custom cut
(E) Government expenditure to be cut by per annum
Choose the correct answer from the option given below:
(1) A, B, C, E only
(2) B, C, D, E only
(3) C, D, E, A only
(4) A, B, D, E only
Question 34:
Arrange the following chronologically in order of their publication starting from the oldest:
(A) General theory of employment, Interest and Money
(B) A treatise of probability
(C) Essays in persuasion
(D) The end of Laissez Faire
(E) A tract on monetary reform
Choose the correct answer from the option given below:
(1) B, C, D, A, E
(2) B, E, D, C, A
(3) E, B, D, C, A
(4) D, E, B, A, C
Question 38:
Which of the following constitutes India՚s strategy to combat climate change in the backdrop
of its stand at the 26th session of the conference of the Parties (COP-26) to the UNFCCC held
in Glasgow, U. K.
(A) phasing out of coal-based thermal power generation by 2030
(B) reduction of the carbon intensity of Indian economy by 45% by 2030, over 2005 levels.
(C) capping Indian economy total final energy consumption in absolute levels.
(D) achieving the target of net zero emissions for India by 2070.
(E) promoting lifestyle for environment to combat climate change
Choose the correct answer from the option given below:
(1) A, B, D only
(2) B, C, D only
(3) B, D, E only
(4) C, D, E only
Question 43:
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Given below are the alternative formulae for F-test statistic. We are interested in testing the
statistical significance of the incremental contribution of at 5% level of significance to
. Which of these is not appropriate? Where RSS is residual sum
of square and ESS is expected sum of square.

(1)

(2)

(3)

(4)

Question 48:
The Uruguay Round of trade negotiations called for
(A) The reduction of average tariffs on industrial goods
(B) Quotas to be replaced by tariffs
(C) The reduction in agriculture export subsidies
(D) The reduction in industrial subsidies
(E) Antidumping and safeguards to be relaxed
Choose the correct answer from the option given below:
(1) A, B, C, D only
(2) B, C, D, E only
(3) C, D, E, A only
(4) D, E, A, B only
Question 54:
The concept of “excess sensitivity” and “excess smoothness” are explained by following
statement (s) .
(A) ‘Excess sensitivity’ refers to a situation where consumption over responds to temporary
income shocks.
(B) ‘Excess smoothness’ refers to a situation where consumption under responds to
temporary income changes.
(C) with excess sensitivity, anticipated rise in income is associated with relatively small
change in consumption.
(D) with excess smoothness, change in aggregate income are associated with relatively large
changes in aggregate consumption.
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(E) ‘Excess sensitivity’ and ‘Excess smoothness’ are related to the empirical evidences of
permanent income hypothesis.
Choose the correct answer from the option given below:
(1) A, B, C, D only
(2) A, B, C, E only
(3) A, B, D only
(4) A, B, E only
Question 57:
Which of the following are true in case of Ramsey Rule for efficient taxation-
(A) tax rate should be higher on the good that has lower price elasticity of demand
(B) if the price elasticity in a market is zero, taxes should be imposed only in that market.
(C) Ramsey rule applies to taxation of goods, but not to taxation of income
(D) Ramsey rule minimises the excess burden of taxation across markets
(E) Ramsey rule does not necessarily result in social justice
Choose the most appropriate answer from the option given below:
(1) A, C, D and E only
(2) A, B, D and E only
(3) A, B, C and D only
(4) A, C and D only
Question 60:
Given below are two statements: One is labelled as Assertion A and the other is labelled as
Reason R.
Assertion A: If governments do not care about protectionists rents, they would replace all
import duties with sales tax
Reason R: Sales tax is more efficient means of raising revenue than import tariff
In the light of the above statements, choose the correct answer from the options given
below:
(1) Both A and R are true and R is the correct explanation of A.
(2) Both A and R are true but R is not the correct explanation of A.
(3) A is true but R is false.
(4) A is false but R is true.
Question 77:

Integrate:

(1)

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(2)

(3)

(4)

Question 79:
In random walk without drift.
(1) The effect of shock persists throughout the time period.
(2) The effect of shock in the past dies out over time.
(3) The effect of shock drifts away quicky.
(4) There is no effect of past shock.
Question 83:
A company has 140 employees, of which 30 are supervisors, 80 of the employees are
married, and of the married employee are supervisors. If a company employee is
randomly selected, what is the probability that the employee is married and is a supervisor?
(1) 0.1531
(2) 0.1253
(3) 0.0923
(4) 0.1143
Question 85: According to Robinson the term ‘Golden Age’ in the context of Harrod-Domar
model is used to emphasize.
(1) its mythical nature
(2) its superiority
(3) Natural growth rate
(4) Warranted growth rate
Question 87:
Sequence of steps followed in the estimation of Indirect Least Square (ILS) starting from the
beginning
(A) Identification of the structural equations,
(B) Application of OLS
(C) Obtaining structural coefficients
(D) Obtaining reduced from equations
(E) Use the model for policy
Choose the correct answer from the option given below:
(1) A, D, B, C and E
(2) A, B, D, C and E
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(3) B, D, A, E and C
(4) B. A. C. D and E
Question 90:
Find the extremum of subject to .

(1)

(2)

(3)

(4)

Read the passage below and answer the question

The government of India՚s fiscal policy response to the covid crises comprised of a judicious
mix of increasing food and fertilizer subsidies on the one hand and a reduction in taxes on
fuel and certain imported products on the other. Despite this additional fiscal pressure, the
union govt. is back on track. The resilience in the fiscal performance of the union
government has been facilitated by the recovery in economic activity buoyancy in revenues
from direct taxes and goods and services tax (GST) and realistic assumptions in the budget.
The gross tax revenue registered a YoY growth of from April to November 2022,
driven by robust growth in the direct taxes and GST. The gross GST-collection has increased
at 24.8% on YoY during the same period. The Union Government՚s emphasis on capital
expenditure (capex) has continued despite higher revenue expenditure requirements
during the year. The centre՚s capex has steadily increased from a long-term average of 1.7
percent of GDP (FY-09 to FY-20) to of GDP in FY-22 PA. The centre has also incentivized
the state governments through interest free loans and enhanced borrowing ceilings to
prioritize their spending on capex. Government has boosted allocations on infrastructure
intensive sectors such as roads and highways. railways and housing and urban affairs, which
has bearing on capex. This increase in capex will have implication for medium term growth
and sustainable government debt to GDP ratio.
Question 95
In order to further enhance capex. allocation for which of the following infrastructure
sector is not increased:
(1) Ports and Waterways
(2) Roads and Highways
(3) Railways
(4) Housing and Urban affairs
Question 96:
Which of the following reflects the shortcomings of ANS?

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(1) It allows the substitution between different forms of capital.

(2) It is not a comprehensive indicator of per capita wealth.
(3) It is influenced by the level of GDP of an economy.
(4) All of the above.
Question 97:
The concept of ANS should at best be used to
(1) guide ecologically optimal sustainable scale
(2) serve as an indicator of unsustainability
(3) replace GDP as a measure of economic progress.
(4) None of the above
Question 98:
Which of the following explains the decline in ANS in countries with increasing GDP per
capita?
(1) increasing proportion of private investment in an economy
(2) depleted assets not offset by sufficient investment in human and physical capital
(3) increasing gross saving rates
(4) increasing production of renewable natural capital
Question 99:
Adjusted Net Savings (ANS) is
(1) A proxy for change in per capita wealth
(2) A stock variable
(3) A flow variable
(4) Unable to capture policy-induced dynamics
Question 100:
Which of the following is not the constituent of ANS?
(1) Public expenditures on education
(2) Air pollution change
(3) depletion of metals and minerals
(4) Loss of biodiversity.

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