UGC NET (Economics) Official Paper (Held On: 19 Dec, 2018 Shift 1) (Previous Year Paper)

The correct answer is George A. Akerlof.

Key Points

• George Akerlof, A. Michael Spence, and Joseph E. Stiglitz received the Nobel Prize in Economics in 2001 "for their analysis of markets with asymmetric knowledge."
• American economist Akerlof demonstrated how asymmetric knowledge can result in markets that do not function efficiently and can result in inefficient market results. Spence, an economist and educator from the United States, provided evidence of how asymmetric knowledge impacts market signals and incentives in the labour market.
• Stiglitz, an American economist and professor, investigated how asymmetric knowledge can result in market inefficiencies and failures by incentivizing enterprises to participate in activities that affect the economy as a whole.

Hence, George A. Akerlof has been awarded the Nobel Prize in Economics "for analysis of markets with asymmetric information".

The correct answer is Unity.

Key Points

• A linear supply curve through the origin has a price elasticity of one (1). Accordingly, a 1% change in price will cause a 1% change in the amount delivered.

• The point where the price is zero and the quantity delivered is also zero is where a supply curve through the origin is a straight line. This kind of supply curve illustrates a constant marginal cost, which means that when production rises, the cost of manufacturing one extra unit of the thing remains constant.

Hence, the price elasticity of a linear supply curve through the origin is Unity.

The correct answer is (i) and (iv).

Key Points

• The statement that the slope of the Average Fixed Cost (AFC) curve is always negative is correct. The AFC curve is downward sloping because as the quantity of output increases, the fixed cost is spread over a larger quantity, leading to a decrease in AFC. Therefore, the slope of the AFC curve is negative.
• The statement that the elasticity with respect to output is equal to one is also correct. The elasticity of AFC with respect to output is equal to one. Elasticity measures the responsiveness of one variable to changes in another variable. In this case, the elasticity of AFC with respect to output is equal to one because the percentage change in AFC is equal to the percentage change in output. This indicates unit elasticity, meaning that a change in output leads to an equal proportional change in AFC.

Hence, the correct statements about the AFC curve are (i) and (iv).

The correct answer is (A) Non-rivalrous (B) Non-excludable.

Key Points

• Based on the crucial aspect of new information as a public good, it is assumed that expensive new knowledge would be undersupplied by the private sector.
• A good that is non-excludable, which means that it is challenging to stop someone from using it once it is generated, and non-rivalrous, which means that one person's use of the item does not decrease its availability for others, is referred to as a public good.
• When it comes to new knowledge, it is frequently difficult for the creator to prevent others from utilising it once it has been created, and one person's use of it does not make it less available to others.
• Due to this, it is challenging for the private sector to realise the full value of new information, and there is a chance that it will produce less than it needs to.

Hence, the presumption that costly new knowledge would be undersupplied by the private sector is based on the essential characteristic of new knowledge (A) Non-rivalrous (B) Non-excludable.

The correct answer is Infinite.

Key Points

• The responsiveness of the ratio of two inputs to changes in their respective prices is gauged by the concept of substitution elasticity. The elasticity of substitution is represented by the following equation in the CES production function:

σ = 1 / (1 + ρ)

• The elasticity of substitution is equivalent to: if = -1
• σ = 1 / (1 + (-1)) = 1 / 0
• Since this result is undefinable, the elasticity of substitution is infinite. As a result, any change in the relative prices of the inputs will cause an infinite change in the ratio of inputs used in production. This suggests that the inputs are perfect replacements.
• In general, close complements and substitutes are indicated by low elasticity of substitution, whereas close substitutes are indicated by high elasticity of replacement. The inputs are perfect substitutes if the substitution elasticity is infinite.

Hence, If for the constant elasticity of substitution production function, the value of the substitution parameter (ρ) is = -1, the elasticity of substitution will be Infinite.

The correct answer is Asymmetric information.

Key Points

• Asymmetric information leads to the issue of adverse selection. When two parties in a market have unequal amounts of knowledge about a certain good or service, this is known as asymmetric information. The side with greater information has a sizable advantage over the opposing party in an adverse selection scenario.
• The insurance sector is most frequently linked to adverse selection. Other marketplaces, like the market for old goods, where the seller may know more about the quality of the goods than the buyer, might also experience adverse selection.
• In certain circumstances, the vendor may be more inclined to sell products of lower quality than they imply, while the buyer may be more willing to overpay for a good that is of lower quality than expected.

Hence, The problem of adverse selection arises due to Asymmetric information.

The correct answer is None of the above statements is correct.

Key Points

• According to the law of variable proportions, the marginal product of a variable input (like labour) would initially increase, then reach a maximum, and then drop as the quantity of the variable input is raised while keeping the quantity of other inputs constant.
• As a result, after reaching a maximum, the average product of the variable input will also begin to drop, but it will always be positive.
• In the Law of Variable Proportion, technological change is taken as a constant.

Hence, None of the above statement is correct about the law of variable proportions.

The correct answer is It is earned in both the long period and the short period.

Key Points

• Both in the short term and the long term, a normal profit can be made.
• A company can make a normal profit in the short term if its total revenue equals its total cost, which includes both explicit and hidden costs.
• The company is currently making just enough money to pay its expenses and reimburse the entrepreneur for their time and labour.
• If a company operates at its long-run average cost, which entails manufacturing at its peak efficiency and utilising the greatest technology, it can generate a typical profit over the long term.
• Currently, the company is just making enough money to pay all of its expenses, including the opportunity cost of the entrepreneur's time and the cost of any capital spent.

Hence, It is earned in both the long period and the short period are correct about normal profit.

The correct answer is a well-behaved production function.

Key Points

• The production function, more precisely the Cobb-Douglas production function, is subject to the Inada conditions. The relationship between inputs (including capital and labour) and output in production is typically described by the Cobb-Douglas production function, which is a common function in economics.
• The Cobb-Douglas production function is required to satisfy a set of mathematical requirements known as the Inada criteria, which are named after economist Kenshiro Inada. According to the Inada conditions, the marginal product of labour approaches zero as the quantity of labour gets closer to zero and the marginal product of labour gets closer to infinity as the quantity of labour gets closer to infinite.

Hence, the Inada conditions are applicable to a well-behaved production function.

The correct answer is Consumers have cardinal utility functions. 

Key Points

• A state of resource allocation known as "Pareto optimality" is one in which it is impossible to improve the situation of any one individual without also making at least one other person's situation worse. It serves as a benchmark for assessing how effectively resources are allocated in an economy.
• Consumers are often believed to have ordinal utility functions rather than cardinal utility functions when discussing Pareto optimality.
• Ordinal utility functions rate or rank various product bundles, but they do not quantify the precise levels of value or satisfaction that customers obtain from each bundle. On the other hand, cardinal utility functions give numerical numbers to the utility that customers receive from various product bundles.

Hence, Consumers have cardinal utility functions one of the statements about Pareto optimality is incorrect.

The correct answer is it implies that unexpected changes in demand have long lasting effect on both unemployment and price level.

Key Points

• The rational expectations theory postulates that people's expectations about the state of the economy in the future are based on all available data and that these expectations influence actual results.
• People may boost production, hire more workers, and invest in capital goods if they anticipate an increase in demand for goods and services, for instance. This in turn may contribute to increasing economic growth and lowering unemployment.
• Similar to the last example, if people anticipate that demand will decline, they may scale back on output, fire employees, and limit investment, which can result in decreased economic activity and more unemployment. Changes in anticipated demand can therefore have a big impact on unemployment and other economic results.

Hence, It implies that unexpected changes in demand have long lasting effect on both unemployment and price level is false of  rational expectations.

The correct answer is the negatively sloped portions of all isoquants.

Key Points

• The economic region of production is a subset of the theory of production function with two variables in economics and microeconomics.
• It is a cost-oriented theory that establishes the area in which the ideal set of factors will be found. It acts as a map of the area with the best production. the part of all isoquants with a negative slope makes up the economic region of production.
• A geographic area where businesses and resources are concentrated and targeted at creating a specific kind of goods or services is referred to as an economic region of production.
• On the other hand, an isoquant is a graphic representation of all the technically viable input combinations that can be utilised to generate a specific degree of output.

Hence, An economic region of production consists of the negatively sloped portions of all isoquants.

The correct answer is None of the above.

Key Points

• The macroeconomic theory known as the Keynesian model, which bears the name of economist John Maynard Keynes, contends that government intervention is required to stabilise the economy. The Keynesian model has a number of important components, including:
• Aggregate demand's function: Keynesian economists contend that economic growth is driven by the total demand for goods and services in the economy, and that low demand can result in economic downturns.
• Government action, such as higher spending or tax reductions, can assist stimulate demand and boost economic activity, according to Keynesian economists.
• The idea of "sticky wages": Keynesian economists contend that because wages react slowly to economic developments, high unemployment rates can result.

Hence, The correct answer is None of these are correct for the Keynesian model.

The correct answer is Increase the level of equilibrium income at all interest rates, shifting the IS curve right.

Key Points

• The IS curve in the IS-LM model depicts the relationship between the interest rate and the GDP level at which the market for goods is in equilibrium.
• The link between the interest rate and the demand for money is represented by the LM (Liquidity-Money) curve. The level of equilibrium income and the interest rate are determined by where the IS and LM curves intersect.
• Government spending growth results in an increase in the overall demand for products and services, which drives up output and hiring at businesses and raises overall revenue. With more income, the IS curve is shifted to the right, raising equilibrium income and possibly lowering interest rates.

Hence, An increase in the level of government spending, other things being equal, will in the IS-LM model Increase the level of equilibrium income at all interest rates, shifting the IS curve right.

The correct answer is (i) and (ii).

Key Points

• Public spending is regarded by Bent Hansen as a factor that improves effective demand. Danish economist Hansen thought that by boosting consumer demand for products and services, government investment could spur economic growth.
• On the other hand, it is thought that a growing population will increase effective demand. Hansen underlined that an increase in population causes an increase in demand since more people using the same resources might cause an individual's demand to rise.
• The banking and financial system helps savers and borrowers connect, but it has no direct impact on effective demand.

Hence,  According to Bent Hansen, Public expenditure and  Rising population were treated as factors enhancing effective demand.

The correct answer is (a) - (ii), (b) - (iv), (c) - (i), (d) - (iii).

Key Points

• Capitalism and Freedom" is written by Milton Friedman, "Capitalism, where he defends a market economy and explains his ideas regarding the function of government in economic matters.
• Socialism and Democracy" is written by Joseph Schumpeter, wherein he talks on the development of capitalism and the function of entrepreneurs in promoting economic growth.
• "Das Kapital" is written by Karl Marx, In which he outlines the principles of his idea of communism and criticises the capitalist economic system.
• "Capital in the 21st Century" is written by Thomas Piketty In which he makes the case that income and wealth inequality are characteristics of capitalism that must be addressed through public policies.

Hence, Capitalism and Freedom" is written by Milton Friedman, "Capitalism, Socialism and Democracy" is written by Joseph Schumpeter, "Das Kapital" is written by Karl Marx, and "Capital in the 21st Century" is written by Thomas Piketty is the correct match.

The correct answer is the demand for money is interest elastic.

Key Points

• Most Keynesians and Monetarists concur that the demand for money is interest elastic, i.e., that it is affected by changes in interest rates.
• Despite their divergent perspectives on a wide range of other economic topics, Keynesians and Monetarists both hold that changes in interest rates have an impact on the demand for money and, consequently, the level of economic activity.
• Both schools of thought contend that when interest rates rise, people are more likely to spend their money rather than save it because the opportunity cost of holding it rises. On the other hand, as interest rates drop, people are more willing to save money rather than spend it since the opportunity cost of keeping it falls.
• Finally, both Keynesians and Monetarists concur that the demand for money is interest elastic, i.e., that it is influenced by changes in interest rates.

Hence, Keynesians and Monetarists agree that the demand for money is interest elastic.

The correct answer is Both (i) and (ii).

Key Points

• The phrase "saving is positively related to income" describes the positive correlation between a household's or an individual's level of savings and their income. In general, households and individuals have more money available to save as income rises.
• The concept in economics that when income rises, the quantity of income saved likewise rises, but at a slower rate is known as marginal propensity to save, which is positive but smaller than 1. In other words, the amount saved from each extra dollar of revenue will be less than what was saved from each dollar of income previously.
• The marginal propensity to save (MPS) is a term used to describe this idea, and it is often stated as a fraction or decimal between 0 and 1.

Hence, Saving is positively related to income and Marginal propensity to save is positive, but less than 1 is correct.

The correct answer is (i) and (ii).

Key Points

• According to New Classical Economics, unexpected and external shocks to the economy, such as technical advancements, are what trigger Real Business Cycles.
• The supply and demand for products and services as a whole may shift as a result of these innovations, according to New Classical economists, causing changes in economic activity and production.
• The dynamic behaviour of prices, wages, and other important economic indicators, which react slowly to changes in the economy, is also viewed as a contributing factor in their estimation of the magnitude of these shocks.
• The primary drivers of business cycles in New Classical Economics are real shocks, specifically innovations and bad weather, which directly affect the economy's productive capacity and lead to fluctuations in economic activity.

Hence, According to New Classical Economics, Real Business Cycles are the result of Innovation and bad weather.

The correct answer is (ii) nd (iv).

Key Points

• The economist David Ricardo was known for his ungentle treatment of nature. British economist Ricardo made significant advances in the areas of commerce and labour theory. He thought that because there was a shortage of land and other resources, economic progress would eventually be constrained. Numerous aspects of classical economic theory were based on the concept of finite resources, which is still hotly debated today.
• The economist Thomas Robert Malthus considered nature to be uncaring. British economist and demographer Thomas Malthus is most well-known for his theories on population growth and how it affects social and economic development. An Essay on the Principle of Population, one of his most well-known works

Hence, David Ricardo and Thomas Robert Malthus is treated nature to be niggardly.

The correct answer is 8%.

Key Points

Percentage annual rate of growth of Real GDP

= Percentage annual rate of growth of Nominal GDP – % annual growth of GDP Deflator 

= 15% – 5% = 10%. 

Percentage annual rate of growth of per capita Real GDP

= % annual rate of growth of Real GDP – % annual rate of growth of population

= 10% - 2% = 8%.

The correct answer is 2%.

Key Points

• In this economy, the rate of increase of output (g) is indicated as 7% annually. Additionally, we are aware that the proportions of labour and capital in total output are, respectively, 40% and 60%. Additionally, we are aware that the growth rates of the labour force (gL) and capital stock (gK) are 3% and 8% annually, respectively.
• TFP growth = Output growth - Capital share * Growth of capital - Labor share * Growth of labor
• Here, we can just plug in the given values:
• • TFP growth = 7% - 0.4 * 8% - 0.6 * 3%
• TFP growth = 7% - 3.2% - 1.8%
• TFP growth = 2%

Hence, In an economy with a linear homogeneous Cobb-Douglas production function, the share of capital and labour in total output are, respectively, 40% and 60%. The capital stock and labour force are growing, respectively, at 8% and 3% per annum. If the rate of growth of output is recorded as 7% per annum, then the rate of growth of Total Factor Productivity will be 2%.

The correct answer is equal to one.

Key Points

• According to the cash balances hypothesis, the demand for money has an elasticity of one, which means that as demand rises, the price level falls proportionately. The Cambridge function, according to Patinkin, "does not imply homogeneous flexibility."
• He claims that this is due to Cambridge economists' failure to fully comprehend the "actual balancing effect's" ramifications. According to Patinkin, a change in the price level will result in a genuine balance effect. For instance, a decline in prices will raise the real value of peoples' cash holdings.
• Therefore, the demand for products and services decreases when there is an excess demand for money. The real balancing impact won't result in a proportionate but non-proportionate shift in the demand for money in this situation. As a result, the elasticity of the demand for money won't be uniform.

Hence, According to the cash-balance approach, the elasticity of demand for money is equal to one.

The correct answer is Only (iv)

Key Points

• SLR is an obligation placed on commercial banks by the central bank to keep a specific percentage of their deposits in the form of liquid assets like government securities. The goal of
• SLR is to guarantee that commercial banks have adequate liquid assets to fulfil their obligations in the event of an unexpected increase in withdrawal requests.
• The way the government borrows money is by selling both individuals and institutions treasury bills and other government securities. These securities are available for purchase from commercial institutions, which enables the government to raise money to support its expenditures.

Hence, SLR acts as an instrument to help in the borrowing by the government.

The correct answer is (i) and (iii).

Key Points

• A growth in the money supply, commonly referred to as monetary inflation, is the main factor causing an increase in the overall price level. Because there is more money available to buy goods and services as the money supply rises, prices rise as a result of an imbalance between supply and demand.
• If demand outpaces supply, an increase in total output (real output) can cause prices to rise, but this is not called inflation unless there is also an increase in the money supply.
• If demand outpaces supply, an increase in effective demand—the demand for goods and services brought on by the interplay of consumers, businesses, and the government—can also result in an increase in prices. The money supply must also increase in order for an increase in effective demand to result in inflation.​

Hence,  An increase in the money supply and increase in effective demand leads to rise in the general price level.

The correct answer is R.H Khan Committee.

Key Points

• The Reserve Bank of India (RBI) established the R.H. Khan Committee, commonly known as the Committee on Comprehensive Financial Services for Small Businesses and Low-Income Households, in 2013.
• The group, which was led by R.H. Khan, a former deputy governor of the RBI, had the job of researching the difficulties low-income households and small companies have in accessing financial services and offering recommendations to increase their ability to obtain credit.
• The concept of universal banking is given by this committee.

Hence, The concept of Universal Banking in India was recommended by R.H. Khan Committee

The correct answer is 12%.

Key Points

• To deliver cost-effective client service, the bank must fully utilise contemporary office equipment, computer, and telecommunications infrastructure. To deal with consumer concerns, it ought to establish a powerful Customer Grievances Cell.
• Within two years of receiving its licence, the bank must list its shares on public exchanges.
• For a minimum of three years from the start of its operations, the bank must maintain a minimum capital adequacy ratio of 12%, subject to any higher percentage that the RBI may from time to time prescribe.

Hence, 12% is the required Capital Adequacy Ratio for a new bank to apply for a license, under the draft guidelines of RBI.

The correct answer is To enable the RBI to achieve the inflation target.

Key Points

• The following is a list of the main goals of the lending rate based on the marginal cost of funds:
• enhancing the policy rate's transmission to the bank's lending rates
• Increasing transparency in the techniques used by different banks to determine interest rates
• ensuring that bank loans are available and have rates that are reasonable for both lenders and borrowers
• allowing the bank and lender to compete more effectively and ultimately increase their value

Hence, To enable the RBI to achieve the inflation target  is not an objective of Marginal Cost of funds based Lending Rate (MCLR).

The correct answer is Milton Friedman.

Key Points

• Friedman makes a distinction between two categories of money demand. Money is required for transactions in the first type. It functions as a means of trade.
• This perspective on money is analogous to the previous quantity theory. However, because it is regarded as an asset in the second category, money is required.
• More fundamental than the medium of commerce is money. It is an asset or a portion of wealth because it houses purchasing power temporarily. According to Friedman, the wealth hypothesis includes the demand for money.

Hence, Milton Friedman said that "Money is a temporary abode of purchasing power"

The correct answer is (a) - (ii), (b) - (iv), (c) - (i), (d) - (iii).

Key Points

• Fisher's Quantity Theory of Money has two approaches: The Cash Balance Approach and the Transaction Approach.
• The Cash Balance Approach is one of the two approaches and is developed by Cambridge economists Marshall, Robertson, Pigou, and Keynes.
• The Cash Balance Approach emphasizes the role of demand for money in the determination of the value of money or its purchasing power. Money balances, according to the Cash Balance Approach, are held by the members of the community because it also serves as a store of value, in contrast to its only function of exchange as stressed in the Transaction
• The approach of the Quantity Theory of Money.
  

The following equations alternately stress how the demand of money, Md, is determined and then since money supply M is fixed at a given point of time, in equilibrium money demand equals money supply, that is, M_d = M.

• (a) n = Pk (ii) Keynes. 
• Here, in the equation, n= the cash or the money balances held by the public; P = the price level of consumer goods; k = the supply of consumer goods for which the cash is kept. If the supply of consumer goods, k, is kept constant, then n bears a directly proportional relation with price level I.
• (b) M = PkT (iv) D.H. Robertson. 
• M = cash balances; P = the price level; Y = the physical volume of transactions. So PT is the money value of total transactions and k is that (constant) fraction of the total moneyed transactions that members of the community desire to hold in the form of money balances.
• (c) (i) A.C. Pigou. 
• Here, P represents the purchasing power of money; R is the real income and k is the proportion of that income people want to hold in the form of money.
• M is the stock of money at a given point in time. So, the equation holds that the purchasing power of money or the value of money (p) varies directly with k or R, and inversely with M. Now, 1/P is the general price level.
• Equation (c) can be rearranged as to show that the price level varies directly with money supply M and inversely with k.
• (d) M = kPY (iii) Alfred Marshall. 
• M = cash balances; P = the price level; Y = real national product. So kPY is that (constant) fraction of the total moneyed transactions which members of the community desire to hold in the form of money balances.

Hence, (a) - (ii), (b) - (iv), (c) - (i), (d) - (iii) is the correct match.

The correct answer is Quantity theory of money.

Key Points

• When there is too much money trying to buy too little, it suggests that the whole demand for commodities is greater than the total supply.
• Demand-pull inflation is the name given to this kind of inflation, which has an increase in the money supply as one of its causes. Anything that is typically acknowledged in the exchange of goods and services is considered money.
• The quantity of money that commercial banks have available to lend out increases when the central bank implements an expansionary monetary policy, such as lowering the reserve requirement. The amount of money that commercial banks generate will therefore rise.

Hence, The statement, "Too much money chasing too few goods" is based on the quantity theory of money.

The correct answer is marginal rate of tax is greater than the average rate of tax.

Key Points

• A taxpayer's marginal tax rate is higher than their average tax rate in a progressive tax system.
• Governments may impose taxes in a number of ways, such as proportionally, regressively, digressively, or progressively. In a progressive tax system, the amount of tax due rises as taxable income does.
• If an individual earns less than the specified minimum taxable amount, there may be a minimum tax-free amount below which they are exempt from making any tax payments to the government.

Hence, An income tax will be progressive if marginal rate of tax is greater than the average rate of tax.

The correct answer is Announcement effect.

Key Points

• Wiseman-Peacock, a hypothesis empirical investigation was conducted in the case of Great Britain. Wiseman-Peacock concentrated on the pattern of public spending and came to the conclusion that public spending increases in jerks or step-like fashion rather than smoothly and continuously.
• Displacement effect: When there is a crisis or a conflict, tax rates are raised to cover the additional public spending. Higher taxes and expenditures offset decreased taxation and spending levels. When taxes are raised, people simply adapt to the new rate. As a result, the tax rate is not decreased further.
• Inspection effect: The government monitors the economy's taxing and spending systems to ensure they are operating properly.
• Concentration: The central government's spending grows faster than that of the state and local governments, meaning that the central government dominates the expenditure concentration.

Hence, announcement effect is not a part of wiseman- peacock hypothesis.

The correct answer is (i), (ii) and (iii).

Key Points

• Short-term expenses used in the present time or often within a year are referred to as revenue expenditures. Revenue expenditures are essentially the same as operating expenses because they cover the costs associated with maintaining a business (OPEX).
• Rent, electricity, property taxes, and business travel are just a few examples of administrative expenses. Since they are not capitalised under the major accounting frameworks, expenses for research and development fall under the category of revenue expenditures.

Hence, Subsidies, Interest payments on public debt, and Wages and salaries are public expenditure in India is classified as revenue expenditure.

The correct answer is  $M =\frac{1-G_a}{1-G_b}$

Key Points

• The Gini coefficient before tax (Gb) and the Gini coefficient after tax (Ga) are used to create the Musgrave and Thin's measure of tax progressivity, which is derived as (Ga - Gb) / Gb.
• When compared to before taxes were enacted, this measurement demonstrates how much an income tax system reduces income inequality as determined by the Gini coefficient.
• A number of zero denotes complete lack of progressivity, while a value higher than zero denotes the existence of a progressive tax system that lessens income disparity.

Hence, $M =\frac{1-G_a}{1-G_b}$  is correctly describes Musgrave and Thin's measure of tax progressivity.

The correct answer is Super Multiplier- J.M. Keynes.

Key Points

• Rethinking Harrod's "knife-edge" Using numerical simulations and the hopf bifurcation theorem * According to Harrod (1939), the permitted rate of growth is a singular moving equilibrium, but also one that is "extremely unstable." This is known as the Instability Principle or Harrod's knife-edge instability.
• Depending on the initial and final levels, turnpike theory is a collection of economic ideas that describe the best course for accumulation (typically capital accumulation) in a system.
• J.R. Hicks originally used the phrase "super-multiplier" in his business cycle theory. The goal was to demonstrate how changes in induced investment and matching changes in income are related.
• The term "Golden Rule Level of Capital," which was first used by Edmund Phelps and is represented by the symbol k*g, refers to the steady-state value of k that maximises consumption per worker.

Hence, Super Multiplier-J.M. Keynes  Concept - Economist pairs is not correctly matched.

The correct answer is Take off.

Key Points

• In Rostow's Stages of Economic Growth model, the "Take-off" stage marks a critical turning point in a country's economic development.
• It is characterized by a significant increase in economic growth and development, driven by rapid industrialization and technological innovation.
• During this stage, a country experiences a significant increase in investment, which leads to the expansion of its productive capacities.
• The Take-off stage is crucial for a country's economic development as it sets the foundation for sustained growth in the future

Additional Information

• It's important to note that Rostow's model is a linear model of economic development and is not applicable to every country or region.
• Additionally, it has been criticized for oversimplifying the complex process of economic growth and ignoring the cultural, social, and political factors that play a role in a country's development.
• Despite its limitations, Rostow's model remains a widely studied and referenced framework for understanding the stages of economic development.

The correct answer is Mode of production changes independently.

Key Points

• According to Karl Marx's theory of economic development, both relations in production and the mode of production change independently.
• In Marx's view, these changes are driven by the contradictions and conflicts within a society's economic system, particularly between the ruling class and the working class.
• Marx believed that the mode of production, which includes the means of production and the social relations of production, is the fundamental determinant of a society's economic and social structure.

Additional Information

• As the mode of production changes, the relations in production also change, leading to the development of new social classes and the reshaping of the existing ones.
• It's important to note that Marx's theory of economic development is a Marxist perspective on the history of economic and social development, and is seen as a critique of capitalism.
• The theory remains influential and continues to be widely studied and debated in the fields of economics, sociology, and political science.

The correct answer is To evade tax.

Key Points

• Round tripping involves routing money through intermediaries in tax havens or other favorable tax jurisdictions
• The goal is to make it appear as foreign investment and evade taxes or capital controls
• Round tripping can have serious consequences, including fines, penalties, and criminal charges

Additional Information

• 'Round tripping' in international trade refers to the practice of moving funds abroad and then bringing them back as foreign investment, with the intention of artificially inflating the volume of foreign investment and evading taxes or capital controls.
• It is considered a form of illegal financial transaction.
• It can also damage a country's reputation as a reliable investment destination and deter genuine foreign investment
• It is important for governments to implement effective regulations and enforcement mechanisms to prevent round tripping, and for individuals and businesses to avoid any involvement in illegal or unethical financial practices

The correct answer is Only (ii)

Key Points

• India was not an importer of only Rice in the year 2015-16.
• India is one of the largest producers of rice and is self-sufficient in its production.
• Despite being a major producer of rice, India still imports small amounts of rice for specific purposes such as for use in the food processing industry.

Additional Information

• India is a significant importer of pulses, such as chickpeas and lentils, to meet the demands of its growing population.
• India is also a major importer of apples, mainly from the United States and New Zealand, due to the shortage of apples in the country.​

The correct answer is World Economic Forum.

Key Points 

• The Global Competitiveness Report is released by the World Economic Forum (WEF).
• The Global Competitiveness Report is a widely recognized and respected annual report that measures the competitiveness of countries based on a range of factors, including infrastructure, institutions, macroeconomic stability, health and primary education, higher education and training, goods market efficiency, labor market efficiency, financial market development, and technological readiness.

Additional Information

• The report is published by the World Economic Forum, a Geneva-based international organization dedicated to improving the state of the world by engaging business, political, academic, and other leaders of society to shape global, regional, and industry agendas.
• It's important to note that the Global Competitiveness Report is one of several indices and reports used to measure a country's competitiveness, and its methodology and rankings may not align with other similar indices.
• Nevertheless, the report provides valuable insights and comparisons for policymakers, businesses, and other stakeholders to evaluate and improve their competitiveness.

The correct answer is Net income transfers.

Key Points

• The balance of payments on capital account records transactions involving financial instruments, such as bonds, stocks, and loans
• It reflects the inflow and outflow of capital into and out of a country
• Foreign portfolio investment and net income transfers are not included in the capital account and are instead recorded in the current account of the balance of payments.
• The balance of payments on capital account  is an important indicator of a country's financial stability and its ability to attract foreign investment.
• It is closely monitored by economists, policymakers, and investors as a means of assessing a country's economic performance and its prospects for growth.

Additional Information

• The balance of payments on capital account is a record of a country's transactions with the rest of the world that involve financial instruments, including bonds, stocks, and loans. It reflects the inflow and outflow of capital into and out of a country.
• The balance of payments on capital account does not include foreign portfolio investment or net income transfers, which are instead recorded in the current account of the balance of payments.

The correct answer is Only (ii).

Key Points

• Devaluation involves a deliberate reduction in the value of a currency
• The effectiveness of devaluation depends on various factors:- 
• When international capital is not freely mobile, devaluation can make a country's exports more competitive and boost demand for its goods and services
• It's important to note that devaluation can also have negative effects, such as inflation and a decline in domestic purchasing power.

Additional Information

• Devaluation of a currency
• The correct statement is:
• only (ii) - Devaluation is more effective when international capital is not freely mobile
• It's therefore typically used as a measure of last resort and only after careful consideration of the potential impacts.

The correct answer is Country A is capital abundant.

Key Points

• The expression (K/L)_A refers to the capital-labor ratio in country A, which is a measure of the amount of capital (K) per unit of labor (L) in the country.
• The expression represents the level of capital intensity in the country's economy.
• It's important to note that a higher capital-labor ratio does not necessarily mean that capital is "dear" in a country.

​ Additional Information

• If (K/L)_A > (K/L)_B, it indicates that the capital-labor ratio is higher in country A compared to country B, implying that capital is more abundant in country A relative to country B.
• Therefore, the correct statement is:
• Country A is capital abundant.
• The cost of capital depends on various factors, including interest rates, availability of capital, and the level of competition in financial markets.

The correct answer is None of the above.

Key Points

• The opportunity cost theory
• It is a fundamental concept in economics that states that the cost of an action is equal to the value of the best alternative action that is forgone.
• In other words, the opportunity cost of a choice is the next best alternative that must be given up in order to pursue that choice.

Additional Information

• Opportunity cost theory does not assume that the cost of a commodity is equal to labor cost only, or that labor is homogeneous.
• It's important to note that the opportunity cost of a choice can include both explicit and implicit costs, such as monetary costs, time costs, and opportunity costs of other goods and services that could have been produced or consumed instead.

The correct answer is (A) is true, but (R) is false.

Key Points

• Rosenstein Rodan promoted the "big push" idea, which emphasizes the necessity for a "big push" or a sizable, all-encompassing investment to get beyond growth barriers in an underdeveloped economy.
• In reality, P.N. Rosenstein-original Rodan's "large push" idea is a stricter version of the "balanced growth" theory. The primary tenet of this theory is that there are significant and pervasive barriers to progress. By its very nature, development is not a seamless or continuous process.

Hence, (A) is true, but (R) is false.

The correct answer is Both (A) and (R) are true and (R) is the correct explanation of (A).

Key Points

• Price rigidity in an oligopoly market refers to firms' propensity to hold steady pricing despite variations in demand or expenses. This is due to the fact that each company in an oligopoly market has a sizable market share, and their price decisions can have an impact on both their own earnings and those of their rivals.
• Firms may engage in strategic pricing behavior in an oligopoly market where they keep an eye on each other's prices and modify their own prices in reaction to changes in their rivals' prices. As a result of each company being motivated to keep prices at a high level in order to maximize profits, this might lead to an industry-wide price level that is stable yet high.

Hence, Both (A) and (R) are true and (R) is the correct explanation of (A).

The correct answer is $\frac{d y}{d x}>0, \frac{d^2 y}{d x^2}< 0$

Key Points

• The curve is upward sloping from left to right, indicating that the function is increasing.
• The derivative of a function gives the rate of change of the function at any point.
• The second derivative of a function gives information about the concavity of the curve.
• The sign of the first and second derivative can help determine the behavior of the function.

 Additional Information

• The first derivative of a function is positive when the function is increasing and negative when the function is decreasing.
• The second derivative of a function is negative when the curve is concave downward and positive when the curve is concave upward.
• In this diagram, the function is increasing, so the first derivative should be positive, i.e., $dy/dx>0$.
• Since the curve is concave downward (curving down), the second derivative should be negative, i.e., $d^2y/dx^2<0$.

Important Points 

• The sign of the second derivative helps determine the nature of the turning points of the curve.
• In this case, since the second derivative is negative, the turning point (where the curve changes from concave upward to concave downward) is a local maximum.

Hence, the given diagram can be represented in terms of derivatives as $\frac{d y}{d x}>0, \frac{d^2 y}{d x^2}< 0$

The correct answer is $\frac{\beta}{\beta-\alpha}>1$.

Key Points

• The Harrod-Domar model is an economic growth model developed by Sir Roy Harrod and Evsey Domar in the 1930s and 1940s.
• The model suggests that economic growth depends on the savings rate and the productivity of capital.
• In the Harrod-Domar model, the savings rate (S_t) is proportional to income (Y_t) with a proportionality constant alpha ($0 < \alpha < 1$).
• Investment (It) is proportional to the difference between current income and income in the previous period with a proportionality constant beta ($\beta > 0$).

Additional Information

• The model assumes that the savings rate is equal to the investment rate, which leads to a steady-state equilibrium.
• To determine the stability of the steady-state equilibrium, we can use the following condition:$\frac{\beta}{\beta-\alpha}>1$.
• If this condition is met, the steady-state equilibrium is stable, and the economy will converge to this equilibrium. If the condition is not met, the steady-state equilibrium is unstable, and the economy will not converge to it.
• In summary, the correct answer is $\frac{\beta}{\beta-\alpha}>1$, which is the stability condition for the steady-state equilibrium in the Harrod-Domar model.
• This condition indicates that the investment multiplier$(\beta / (\beta - \alpha))$ must be greater than one for the steady-state equilibrium to be stable.

Hence, according to Harrod's growth model, the condition for economic growth is $\frac{\beta}{\beta-\alpha}>1$

The correct answer is 31.5.

Key Points

• Consumer surplus: 
• The difference between the maximum price a consumer is willing to pay for a good or service and the actual price they pay is known as consumer surplus (CS).
• It represents the benefit or surplus that the consumer receives from purchasing the good or service at the given price.
• To calculate the consumer surplus at a given quantity demanded, we first need to find the equilibrium price (where the quantity demanded equals the quantity supplied) for that quantity.
• This can be done by setting x equal to the given quantity and solving for p.
• Once we have the equilibrium price, we can calculate the consumer surplus as the difference between the willingness-to-pay (the maximum price the consumer is willing to pay for the given quantity) and the equilibrium price.
• The willingness to pay is given by the demand function evaluated at the given quantity.

Additional Information

• Method 1: 
• To calculate the consumer's surplus at x=3, we first need to find the equilibrium price at which the quantity demanded is 3.
• We can do this by setting x=3 and solving for p:
• $p = 27 - 3x - x^2 = 27 - 3(3) - (3)^2 = 27 - 9 - 9 = 9$
• So the equilibrium price when the quantity demanded is 3 is p=9.
• Next, we need to calculate the area of the triangle that represents the consumer's surplus.
• The formula for the area of a triangle is (base * height) / 2, where the base is the quantity demanded and the height is the difference between the equilibrium price and the price that the consumer is willing to pay.
• At x=3, the consumer is willing to pay a price of p=18, which we can find by plugging x=3 into the demand function and solving for p:
• p = 27 - 3x - x^2 p = 27 - 3(3) - (3)^2 p = 18
• The height of the triangle is:
• height = equilibrium price - willingness to pay height = 9 - 18 height = -9
• Since the height is negative, we need to take the absolute value to get the area of the triangle:
• area = (base * |height|) / 2 area = (3 * 9) / 2 area = 13.5
• Therefore, the consumer's surplus at x=3 is 31.5 (the difference between the consumer's willingness to pay and the equilibrium price) plus 13.5 (the area of the triangle representing the surplus), which gives a total consumer surplus of 45.
• In this case, the consumer's surplus at x=3 is represented by a triangle, with base 3 and height equal to the difference between the equilibrium price (9) and the consumer's willingness to pay (18). However, since the height is negative, we need to take the absolute value of the height to get the area of the triangle.
• The total consumer surplus is the sum of this triangular surplus and the rectangular surplus given by the difference between the willingness to pay and the equilibrium price (31.5).
• Method of Integration: 
• Consumer surplus is the deduction of the amount the consumer actually pays to get a designated quantity from the area underneath the demand curve at the same designated quantity demanded.
• Given, p = 27 - 3x - x2
• At x = 3. p = 9 
  

⇒ equilibrium price or the price the consumer actually pays

= Rs. 27

• The area underneath the demand curve at x = 3 is
• ${\int_0^127 - 3x -x^2\mathrm{d}x}$
  

$=[27x - \frac{3}{2}x^2 - \frac{1}{3}x^3]_0^3$

$= [27 \times 3 - \frac {3}{2} \times 3^2 - \frac {1}{3} 3^3] - [27 \times 0 - \frac {3}{2} \times 0 - \frac {1}{3} 0^3]$

$= [81 - \frac {27}{2} - 9]$

$=58.5$

• Therefore, consumer surplus = Rs. (58.5 - 27) = Rs. 31.5

Hence, given the condition the consumer's surplus at x = 3 is 31.5.

The correct answer is 10.

Key Points

• We must establish the amount of output that maximizes the monopolist's profit in order to find the output for the monopolist that maximizes profit. The difference between total revenue (TR) and total cost (TC) determines the monopolist's profit:
• TR = pq = 100 - 4 qq = 100q - 4 q
• TC = C = 50 + 20q
• Profit = TR - TC = 100 - 4 in quarters.
• 2 - 50 - 20q = -4q^2 + 80q - 50
• We take the derivative of the profit function with respect to q and set it to zero in order to maximize the profit:
• -8q = -80 q = 10 d(Profit)/dq = -8q + 80 = 0
• As a result, q = 10 is the monopolist's output that maximizes profits. We may enter q = 10 into the demand function to determine the relevant price:
• p = 100 - 4q = 100 - 4(10) = 60
• Thus, p = 60 is the price that maximizes profit.

Hence, the monopolist's output that maximizes profits is q = 10, and the corresponding price is p = 60.

The correct answer is (a) - (iii), (b) - (i), (c) - (iv), (d) - (ii).

Key Points

• A collection of prerequisites known as the Hawkins-Simon criteria is required for the effective distribution of resources in a general equilibrium model. The three economists who created the conditions in the 1950s and 1960s are called for them: Kenneth J. Arrow, Frank H. Hahn, and John R. Hicks.
• A saddle point in game theory is a position in a matrix describing a two-player game that has the smallest value in a row and the largest value in a column (or vice versa). A saddle point is a cell in a two-player game matrix where the minimum value of the row in which the cell is located is equal to the maximum value of the column in which the cell is located.
• A popular algorithm for tackling linear programming issues is the simplex method. It was created in 1947 by the mathematician George Dantzig and has since grown to be a vital tool in a variety of applications in operations research, engineering, and applied mathematics.
• There are a number of prerequisites for limited optimization problems known as the Kuhn-Tucker requirements. These techniques, which are a generalization of the Lagrange multiplier approach, are used to identify solutions to issues where the constraints are inequalities rather than straightforward equalities.

Hence, (a) - (iii), (b) - (i), (c) - (iv), (d) - (ii) is correct.

The correct answer is (i), (ii) and (iii)

Key Points

• An employer must pay a tax known as the Fringe Benefits Tax (FBT) on specific benefits they give their employees. These perks might take the shape of money-related or non-financial rewards, and they can range from company automobiles to private healthcare to educational advantages.
• The profit that an investor makes when they sell an investment is subject to the capital gains tax. It must be paid in the tax year when the investment is sold. Depending on the filer's income, the long-term capital gains tax rates for the 2022 and 2023 tax years are 0%, 15%, or 20% of the profit.
• In India, a tax known as the Stocks Transaction Tax is levied on the value of securities bought and sold on a licenced stock exchange. In terms of delivery-based equity trading, it is 0.1% as of 2016. Off-market, currency or commodity transactions are not covered by STT.

Hence, Fringe benefit tax, Capital gain tax and Securities transaction tax are the direct tax,

The correct answer is Where investment per worker is equal to savings per worker.

Key Points

• Markets are self-regulatory, according to neoclassical theory. Resource allocation is made more efficient by competition.
• Equilibrium is produced through the interaction of supply and demand, which enables markets to adapt to changes without the need for monetary or fiscal policy to restore balance.
• Even though an economy has a finite amount of labour and capital resources, technology can nonetheless make a limitless contribution to growth.
• The growth equilibrium in the fundamental neo-classical growth model occurs when investment per worker equals savings per worker.

Hence, In the basic neo-classical growth model, the growth equilibrium occur where investment per worker is equal to savings per worker.

The correct answer is All of the above.

Key Points

• The fundamental economics conclusion known as Uzawa's theorem, which bears the name of the Japanese economist Hiroshi Uzawa, establishes a connection between the ideal growth rate and the speed of technological advancement.
• It is crucial in the context of endogenous growth theory, a school of economics that contends that internal economic forces, as opposed to exogenous ones like population increase or resource availability, can explain long-term economic growth.
• The production function is homogeneous and linear. Only "Harrod neutral" technological advancement has been made.

Hence, The growth rate of output per worker, consumption per worker and capital per worker are equal and constant over time, The production function is linear homogeneous and The technical progress is 'Harrod neutral' only is correct.

The correct answer is Large scale expansion of activities to overcome divergence between private and social benefits.

Key Points

• When output and the capital stock grow at the same rate, macroeconomically speaking, this is known as balanced growth.
• The long-term stability of real interest rates can be explained by this development path, but it is predicated on some significant assumptions.
• The idea behind balanced growth from the supply side is that different economic sectors should develop simultaneously to avoid creating obstacles to economic development.
• Agriculture, industry, internal trade, transportation, etc., should all develop at the same time, for instance.
• The initial interpretation of the BG philosophy was the wide-scale extension of economic activity to bridge the gap between private and social return.

Hence, The original interpretation of balanced growth relates to Large scale expansion of activities to overcome divergence between private and social benefits.

The correct answer is All of these.

Key Points

• The term "intellectual property," or "IP," refers to all of the legal protections for ideas and concepts as they are realized. You can use intellectual property rights to protect things like music, trade names, brand names, product designs, techniques, games, software, lyrics, and photos.
• Understanding how they function and how they are made is essential to knowing how to safeguard a company's valuable assets, such as patents, trademarks, copyrights, and trade secrets.
• A work's owner is typically considered to be its creator. However for various kinds of property and in various situations, intellectual property ownership can be decided in various ways. For instance, if a piece of work is produced for a client, the client is the owner of that intellectual property.

Hence, Intellectual property rights includes patents, copyrights and trademark.

The correct answer is All of these.

Key Points

• The Ministry of Agriculture and Farmers Welfare in India has an affiliated office called the Commission for Agricultural Costs & Prices (CACP). In January 1965, it was created. The Commission now consists of a Chairperson, Member Secretary, one Official Member, and two Members (Non-Official). Representatives of the farming community, the non-official members typically have a close relationship with the farming community.
• It is required to recommend minimum support prices (MSPs) in order to encourage farmers to use new technology, increase productivity, and increase overall grain production in accordance with the nation's changing demand trends.

Hence, All of these is correct for Commission for Agricultural Costs and Prices (CACP).

The correct answer is subtract the costs of environmental degradation.

Key Points

• The Index of Sustainable Economic Welfare (ISEW), a financial indicator, modifies Gross Domestic Product (GDP) by taking into account social and environmental elements that are not taken into account in the conventional GDP measure. A number of adjustments are applied to the value of GDP in order to calculate the ISEW.
• While calculating the ISEW, one of the adjustments made to GDP is to take the costs of environmental deterioration out.
• The ISEW makes additional adjustments to GDP in addition to deducting the costs of environmental degradation, such as adding the value of non-market goods and services (such volunteer work and household production) and deducting the costs of income inequality and crime.

Hence, To compute the 'Index of Sustainable Economic Welfare', Subtract the costs of environmental degradation is made in the value of GDP.

The correct answer is "Ageing of population in Kerala is faster than in Bihar."

Key Points

• The death rate in Kerala (7.6) is higher than that in Bihar (6), which suggests that a higher number of deaths occur in Kerala per thousand of the population compared to Bihar.
• One of the main factors contributing to the higher death rate in Kerala is its rapidly ageing population.
• The death rate is the number of deaths per thousand of the population.
• A higher death rate indicates a higher number of deaths occurring in a given population.
• The death rate does not necessarily indicate the overall health condition of the population.
• Health status can be influenced by various factors such as age distribution, access to healthcare, lifestyle factors, and environmental factors.

Additional Information

• Kerala has a higher proportion of elderly people than Bihar, and the elderly are more susceptible to health issues and mortality. In contrast, Bihar has a younger population, which may be a contributing factor to the lower death rate.
• The other options are not correct because:
• The lower death rate in Bihar does not necessarily indicate that the health condition of people in Bihar is better than that in Kerala.
• It could be due to factors such as the lower prevalence of chronic diseases, accidents, or infectious diseases in Bihar, or due to differences in reporting and recording of deaths.
• The given data does not provide any information on the suicide rate in Kerala or Bihar, so it is not a valid inference.
• The given data does not provide any information on life expectancy in Kerala or Bihar, so it is not a valid inference.

Hence, from these data it can be inferenced that ageing of population in Kerala is faster than in Bihar.

The correct answer is compressed natural gas.

Key Points

• The majority of the carbohydrates used to make bioethanol come from plants that contain sugar or starch, such as corn, sugarcane, sweet sorghum, or lignocellulosic biomass.
• A type of diesel fuel called biodiesel is made of long-chain fatty acid esters and is obtained from either plants or animals. It is primarily produced chemically through transesterification, which involves reacting lipids like animal fat (tallow), soybean oil, or another type of vegetable oil with an alcohol to produce a methyl, ethyl, or propyl ester.
• In the mixing tank, cow dung and water are combined to create a slurry that is then fed into the digester. The name "gobar gas" comes from the fact that the raw ingredient is cow dung.

Hence, Compressed Natural Gas  is not included in the category of Bio-fuels.

The correct answer is (ii) and (iii).

Key Points

• The "Transformation of Aspirational Districts" initiative seeks to eliminate this heterogeneity by mobilizing a large-scale effort to successfully and speedily improve these areas.
• The Aspirational Districts Program was introduced by the Honourable Prime Minister, Sh Narendra Modi, in January 2018 with the aim of accelerating the transformation of 112 of the most underdeveloped districts across 28 states. Senior Union government officials selected the districts after consulting with state leaders.
• The program's goal is to track aspirational districts' development in real time. Based on 81 data points from the five specified subject areas and 49 indicators.

Hence, (ii) and (iii) are correct for Transformation of Aspirational Districts.

The correct answer is Population growth becomes zero.

Key Points

• Low birth and death rates, along with a stable or slowly expanding population, constitute the third stage of the theory of demographic transition.
• In industrialized nations that have undergone industrialization and urbanization, this stage often happens. Increased access to contraception, women's participation in school and the workforce, and shifting social standards are all factors that have an impact on low birth rates.
• As the population ages, there may be a less workforce available to care for the elderly, which could result in higher healthcare expenses. Negative population growth may occur in some nations, which may have social and economic repercussions.

Hence, Population growth becomes zero is not true about third stage of demographic transition.

The correct answer is Both (A) and (R) are true and (R) is the correct explanation of (A).

Key Points

• The economy and employment of India are mostly based on the service industry, which includes businesses like information technology, business process outsourcing, finance, healthcare, and tourism.
• In fact, the service sector's contribution to India's GDP has been rising gradually over the years and now exceeds 50% of the national GDP.
• In a similar vein, the service sector accounts for the biggest proportion of employment overall in India. This is due to the fact that the service sector employs a significant number of people, both skilled and unskilled, and is very labor-intensive.

Hence, Both (A) and (R) are true and (R) is the correct explanation of (A).

The correct answer is $\frac {1}{30}$.

Key Points

• Probability is a measure of the likelihood of an event occurring, expressed as a number between 0 and 1 (inclusive).
• In this problem, we are dealing with a situation of drawing objects without replacement. This means that once an object is drawn, it is not put back into the box for subsequent draws. As a result, the probability of drawing the second object depends on what was drawn on the first draw, and so on.
• The probability of drawing an event can be calculated using the formula:
• P(event) = (number of ways the event can occur) / (total number of possible outcomes)
• In this problem, there are 4 defective bulbs out of a total of 10 bulbs, so the probability of drawing a defective bulb on the first draw is 4/10 = 2/5.
• Once a defective bulb is drawn on the first draw, there are 3 defective bulbs left out of a total of 9 remaining bulbs. Therefore, the probability of drawing a defective bulb on the second draw, given that the first draw was defective, is 3/9.
• Similarly, once two defective bulbs are drawn, there are 2 defective bulbs left out of a total of 8 remaining bulbs. Therefore, the probability of drawing a defective bulb on the third draw, given that the first two draws were defective, is 2/8.
• To find the probability of all three bulbs being defective, we need to multiply the probabilities of drawing a defective bulb on each of the three draws. This is because the three events are independent and each draw is affected by the previous draws.
• Multiplying the probabilities of drawing a defective bulb on each of the three draws gives (2/5) * (3/9) * (2/8) = 1/30, which is the probability of drawing all three defective bulbs without replacement.

Additional Information

• To find the probability that all three bulbs are defective, we need to use the concept of conditional probability.
• Let D1, D2, and D3 be the events that the first, second, and third bulbs drawn are defective, respectively.
• Then, the probability of all three bulbs being defective can be calculated as follows:
• $P(D1 and D2 and D3) = P(D1) * P(D2|D1) * P(D3|D1 and D2)$
• The probability of the first bulb being defective is 4/10, since there are 4 defective bulbs out of a total of 10 bulbs in the box. Once we draw a defective bulb, there will be 3 defective bulbs left in the box and 9 total bulbs.
• Thus, the probability of the second bulb being defective, given that the first bulb was defective, is 3/9.
• Similarly, once we have drawn two defective bulbs, there will be 2 defective bulbs left in the box and 8 total bulbs. Thus, the probability of the third bulb being defective, given that the first two bulbs were defective, is 2/8.
• Substituting these values into the formula above, we get:
• $P(D1 and D2 and D3) = (4/10) * (3/9) * (2/8) = 1/30$
• Therefore, the probability that all three bulbs are defective is 1/30.
• It is important to note that the assumption of drawing the bulbs randomly without replacement is crucial in this calculation.
• If the bulbs were drawn with replacement, the probability of all three bulbs being defective would be different. In addition, the same approach can be used to calculate the probability of other combinations of defective and non-defective bulbs being drawn.

Hence, the probability that all three bulbs are defective is $\frac {1}{30}$

The correct answer is – (ii) and (iii)

Key Points

• Statement (i): The series will have seasonal variations
• Seasonal variations occur within a year (monthly, quarterly, weekly data).
• Since the data are annual observations, seasonal effects cannot be identified.
• Therefore, statement (i) is incorrect.
• Statement (ii): The series will have a secular trend
• A secular trend represents the long-term movement in a time series.
• Sales data observed over ten years can show a long-run increasing or decreasing trend.
• Hence, statement (ii) is correct.
• Statement (iii): The series will have cyclical variations
• Cyclical variations are long-term oscillations associated with business cycles.
• Such variations may appear in annual sales data due to economic expansions and recessions.
• Hence, statement (iii) is correct.

Additional Information

• Components of Time Series
• Trend – Long-term movement.
• Seasonal – Regular intra-year pattern.
• Cyclical – Business cycle fluctuations over years.
• Irregular – Random, unforeseen variations
• Seasonal variation is never present in annual data.

The correct answer is (a) - (iv), (b) - (i), (c) - (ii), (d) - (iii).

Key Points

• The Delphi method is a systematic and participatory forecasting methodology used to collect and combine expert opinions from a panel of participants, generally through a series of surveys or questionnaires.
• A statistical test known as the Dickey-Fuller test is used to detect whether or not a time series is stationary. It bears the names of the two economists David Dickey and Wayne Fuller who came up with the test's initial idea in 1979.
• A statistical technique called the Durbin-Watson test can be used to determine whether autocorrelation exists in the residuals of a regression study. In 1950, James Durbin and Geoffrey Watson made the initial suggestion.
• To evaluate whether there is a significant difference between the means of two groups of data, the Student's t-test is a statistical hypothesis test that is employed. William Sealy Gosset, who wrote under the pen name "Student," created it.

Hence, (a) - (iv), (b) - (i), (c) - (ii), (d) - (iii) is correct.

The correct answer is Only m -1 dummy variables.

Key Points

• If a quantitative variable in regression analysis has "m" categories, one can add "m-1" dummy variables to the model. Dummy coding or indicator variable coding are terms used to describe this method.
• To represent categorical data in a regression model, utilize dummy coding. One category of the original variable is identified as the reference or baseline category, and one binary (dummy) variable is created for each of the other categories. Usually, the category with the lowest or most frequent value is the reference category.

Hence, In Regression Analysis, if a quantitative variable has 'm' categories, one can introduce Only m -1 dummy variables.

The correct answer is indeed (i), (ii) and (iii).

Key Points

• Simultaneous equations econometric models are used to analyze the interdependence between multiple economic variables, such as supply and demand, investment and consumption, or exports and imports.
• These models typically involve a set of equations that are solved simultaneously to obtain the values of the endogenous variables.
• Identification is a key concept in econometric modeling, as it determines whether the parameters of the model can be estimated uniquely from the data.
• Identification requires that the model is not subject to the problem of omitted variable bias, which occurs when a relevant variable is not included in the model, and that the model is not over-parameterized, which occurs when there are more parameters than observations.
• The order condition for identification requires that the number of equations in the model is at least equal to the number of endogenous variables, and that each endogenous variable appears only once as a dependent variable.
• The rank condition for identification requires that the matrix of coefficients on the endogenous variables has full rank, which means that the equations are not linearly dependent.

Additional Information

• Statement (i) is correct because both order and rank conditions need to be satisfied for the model to be identified.
• The order condition ensures that the model is not under-identified, while the rank condition ensures that the model is not over-identified.
• Statement (ii) is correct because the order condition is necessary but not sufficient for identification.
• A model that satisfies the order condition may still be unidentified if the rank condition is not satisfied.
• Statement (iii) is correct because the two-stage least squares (2SLS) method is a commonly used estimation method for over-identified equations, which are equations that have more instruments than endogenous variables.
• 2SLS is a variant of instrumental variables (IV) regression that uses a first stage regression to obtain predicted values of the endogenous variables, and a second stage regression to estimate the coefficients of the model using the predicted values as instruments.

Important Points

• It is worth noting that simultaneous equations models can be subject to various other identification problems, such as weak instruments, measurement error, and simultaneity bias.
• These problems can lead to biased and inconsistent parameter estimates, and may require the use of specialized estimation methods and diagnostic tests to address them.

Hence, both order and rank conditions for identification are to be satisfied before estimation, order condition is a necessary but not a sufficient condition of identification, two-stage least squares method is suitable for over-identified equations.

The correct answer is they are charges at the same rate for all income groups.

Key Points

• Low and high income earners pay the same amount under a regressive tax, which is a kind of tax imposed regardless of income.
• Low-income taxpayers are more negatively impacted by this type of tax than high-income earners. Regardless of their financial situation, everyone who purchases a goods must pay indirect taxes.
• Because of their regressive effects, indirect taxes increase the inequality of the income distribution. It is a regressive tax since the poor will pay a higher percentage of their income in taxes than the rich. Indirect tax increases may result in cost-push inflation, which may raise inflation expectations.

Hence, Indirect taxes called regressive as they are charged at the same rate for all income groups.

The correct answer is None of the above are correct.

Key Points

• The combination of material and immaterial productive forces, in Schumpeter's view, characterises the production process.
• The fundamental factors of production, like as land and labour, are the source of the material productive forces, while the "technical facts" and "facts of social organisation" condition the immaterial set of productive forces.
• According to Schumpeter, the growth of the economic system can only be gradual, continuous, and slow as a result of changes in the supply of productive resources.
• In the dynamic evolution of the economy, Schumpeter distinguished two elements: (a) the "growth component," which causes gradual, continuous, and slow evolution as a result of changes in the availability of factors, and (b) the "development component," which causes abrupt and discontinuous change in the channels of output flow as a result of changes in the technological and social environments.

Hence, None of the given statement is correct as per schumpeter.

The correct answer is (i), (iii) and (iv)

Key Points

• According to the three conditions outlined by neoclassical growth theory, an economy must grow. They are technology, capital, and labour.
• Neoclassical growth theory, on the other hand, makes clear that short-term equilibrium is distinct from long-term equilibrium, which is independent of all three of these conditions.
• It entails Perfect competition rules, interest rates and profits are adjustable, and capital and labour are interchangeable.

Hence, Rate of interest and profit are flexible, Perfect competition prevails and Capital and labour are substitutable are correct about Neo-classical growth model.

The correct answer is Education-labour ratio, education-income ratio and education-investment ratio.

Key Points

• The three components of Theodore Schultz's 1960 human capital theory of economic growth are as follows:
• Human capital is the factor most likely to limit growth;
• Economic growth can only advance if physical capital and human capital rise together; (Education-labour ratio, education-income ratio and education-investment ratio) and
• Countries without a lot of human capital cannot manage physical capital successfully.

Hence, T.W. Schultz has given the following ratios in relation to education for economic growth is Education-labour ratio, education-income ratio and education-investment ratio.

The correct answer is Income elasticity of demand for primary goods is low.

Key Points

• The terms of trade refer to the relationship between the prices of a country's exports and the prices of its imports
• An improvement in the terms of trade means that the prices of a country's exports have risen relative to the prices of its imports
• The historically unfavorable terms of trade of developing countries is largely due to the low income elasticity of demand for primary goods.
• It's important to note that a low income elasticity of demand for primary goods can result in persistent unfavorable terms of trade for developing countries, as it means that their exports do not benefit as much as exports of other goods and services when income in developed countries rises.

Additional Information

• Historically, the terms of trade of developing countries have often been unfavorable, and this is largely due to the fact that the income elasticity of demand for primary goods (such as commodities and raw materials) is low.
• This means that as income in developed countries rises, the demand for primary goods does not increase proportionately, leading to a decline in the prices of these goods relative to other goods and services.

The correct answer is (i), (iii) and (iv).

Key Points

• According to New Trade Theory (NTT), very significant economies of scale and network effects that might develop in important industries play a crucial role in establishing global trade patterns.
• The more conventional theory of comparative advantage may be superseded by these economies of scale and network effects.
• The ability of businesses to gain market dominance by entering the market early is another aspect of new trade theory. This is because the initial enterprises experience significant economies of scale, making it impossible for new firms to compete with the established ones.
• This indicates that there would likely be little competition in these global industries with very huge economies of scale, with early entrants dominating the market and creating a type of monopolistic competition.

Hence, (i), (iii) and (iv) are correct for the New trade theory.

The correct answer is "(i), (iv), (iii), (ii)".

Key Points

• The maternal Mortality Ratio (MMR) is the number of maternal deaths per 100,000 live births.
• The Special Bulletin of SRS, May 2018 provides the MMR estimates for different states in India.
• According to the bulletin, the descending order of states according to MMR is: Assam(229), Uttar Pradesh(216), Madhya Pradesh(188), and Bihar(165).
• This means that Assam has the highest MMR among the given states, followed by Uttar Pradesh, Madhya Pradesh, and Bihar. 

Additional Information

• The other answer option, "(iv), (i), (ii), (iii)", is incorrect because it lists Uttar Pradesh first, which is not correct according to the bulletin.
• It is important to note that MMR is an important indicator of maternal health, and high MMR indicates inadequate maternal healthcare and poor maternal health outcomes.
• Efforts to reduce MMR require improving access to quality healthcare, particularly for marginalized and vulnerable populations.

Hence, according to Maternal Mortality Ratio (MMR) as per the Special Bulletin of SRS, May, 2018 the given states in descending order are - Assam, Uttar Pradesh, Madhya Pradesh and Bihar.

The correct answer is r.

Key Points

• Price elasticity of demand is defined as the percentage change in the quantity demanded of a good in response to a one percent change in its price, all other factors remaining constant.
• Mathematically, price elasticity of demand is expressed as:
• $E = \frac {\%Δq}{\%Δp}$
• where E is the price elasticity of demand, %Δq is the percentage change in quantity demanded, and %Δp is the percentage change in price.
• Given the demand function$q = kp^{(-r)}$, we can take the natural logarithm of both sides to obtain:
• $ln(q) = ln(k) - r \times ln(p)$
• Differentiating both sides with respect to p, we get:
• $\frac {1}{q} \times \frac {dq}{dp} = - \frac{r}{p}$
• Multiplying both sides by p/q, we get:
• $\frac {p}{q} \times \frac {dq}{dp} = - r$

​ Additional Information

• The price elasticity of demand (PED) measures the responsiveness of quantity demanded to changes in price. It is typically calculated as the percentage change in quantity demanded divided by the percentage change in price.
• In the demand function q = $kp^{(-r)}$, we can find the PED by taking the derivative of quantity demanded with respect to price:
• $dq/dp = -rkp^{(-r-1)}$
• Then, we can use the formula for PED:
• PED = $\frac {dq}{dp} \times \frac {p}{q}$
• Simplifying this expression using the demand function, we get:
• PED = $(-rkp^{(-r-1)}) \times (\frac {p}{q}) = (-r) \times \frac {p}{q} \times \frac {p^r}{k}$
• Notice that the PED depends on the value of r, so the correct answer is indeed r.
• Specifically, the PED is inversely proportional to r. This means that as r increases, the PED decreases, indicating a less elastic demand.

 Important Points

• As r approaches zero, the demand becomes infinitely elastic (i.e., perfectly responsive to changes in price), while as r approaches infinity, the demand becomes perfectly inelastic (i.e., unresponsive to changes in price).
• The other options presented in the question are incorrect for different reasons.
• The first option is incorrect because it does not depend on the value of r and suggests a constant PED, which is not the case.
• The third option is incorrect because it suggests an inverse relationship between PED and r, which is not accurate. Instead, as noted earlier, PED is inversely proportional to r.
• Finally, the last option i.e. "Not constant as the function is non-linear" is partially correct but does not provide any information about how PED varies with changes in r.

Hence, the price elasticity of demand for a good with the demand function q = kp-r is r.

The correct answer is 105.

Key Points

• We must divide all of the index numbers by the index number for 2015 and then multiply by 100 in order to change the base year to 2015. With 2015 serving as the base year and being expressed as 100, this will provide us with a new set of index numbers.
• In the new series, 2014's index number will be (100/120) x 100, which equals 83.33.
  

The new series' index number for 2015 will be (120/120) x 100 = 100.

Moreover, the new series' index number for 2016 will be (126/120) x 100 = 105.

As a result, the value of the index number in the new series with the base year 2015 will be 105 in 2016.

Hence, If the base year is shifted to year 2015, the value of index number in the year 2016, in the new series will be 105.

The correct answer is 3.3% of GDP.

Key Points

• In 2019–20, the government plans to spend Rs 27,86,349 crore, which is 13.4% more than the updated estimate for 2018–19.
• Due to higher projected corporate tax and dividend income, the collections (other than net borrowings) are anticipated to rise by 14.2% to Rs 20,82,589 crore.
• In 2019–20, the government expects the nominal GDP to rise at a rate of 12% (real growth plus inflation). Estimated nominal growth for the period of 2018–19 was 11.5%.
• The target revenue shortfall for 2018–19 is 2.3% of GDP, which is higher than the previously estimated 2.2%. Lower than the updated forecast of 3.4% for 2018–19, the fiscal deficit is aimed at 3.3% of GDP. It should be noted that the government is predicted to fall short of both the medium-term fiscal aim of 3.1% in 2019–20 and the planned target of 3.3% for the fiscal deficit in 2018–19.

Hence, According to the Union Budget, Fiscal deficit targets for 2018-19 is 3.3% of GDP.

The correct answer is Only (iv).

Key Points

• Developmental Expenditure is the financial outlay made by the government for the nation's social and economic advancement.
• Examples of expenditures for development include expenditures for economic services, expenditures for social and socialist services, grants to governments, expenditures for railways, power, health, education, and science and technology.
• Government spending that has no direct impact on the nation's economic development is referred to as non-developmental spending.

Hence, Development expenditure of the Central Government does not include defense expenditure.

The correct answer is Moral Hazard.

Key Points

• When one side takes unwarranted risks knowing they won't be held accountable for the unfavorable outcomes, this is referred to as moral hazard.
• This means that in the case of agricultural loan waivers, farmers may take on more debt than they can reasonably repay since they are certain that the government will forgive their loans if they are unable to make payments.
• The issue with this is that it can lead to a vicious cycle of debt and dependence in which farmers accumulate increasing amounts of debt without being able to pay it back and depend on loan forgiveness programs to bail them out.
• Because they won't be held responsible for their conduct, farmers may become less prudent with their money and take on more risks as a result.

Hence, the frequent farm loan waivers in India may give rise to the problem of moral hazard.

The correct answer is (i), (ii), (iii), (iv).

Key Points

• The Comprehensive Crop Insurance System (CCIS) was established in 1985 with the goal of supporting farmers in the crop failure because of a drought, flood, etc. Up till the Rabi 1996–97 season, around 5.82 crore farmers have been covered by the program since its commencement in 1985.
• To lessen farmers' exposure to natural calamities, GoI launched the National Agricultural Insurance System (NAIS) in 1999. The Agricultural Insurance Company of India, a state-owned insurer, provides insurance for food crops, oilseeds, and a few commercial crops on behalf of the NAIS (AICI).
• 50 districts will use a modified version of NAIS that incorporates the Joint Group's significant enhancement recommendations. In cooperation with the States/UTs, these districts may be determined. Any farmers* who grow the notified crops in the notified areas, including tenant farmers and sharecroppers, are eligible for coverage.
• The Pradhan Mantri Fasal Bima Yojna was introduced by Prime Minister Shri Narendra Modi on February 18, 2016. In Rabi 2016–17, 23 states and 2 UTs implemented the program, compared to 21 states in Kharif 2016.

Hence,  (i), (ii), (iii), (iv) crop insurance schemes in the chronological order of their launch.

The correct answer is 2005.

Key Points

• The Honourable Prime Minister established the National Rural Health Mission (NRHM) on April 12, 2005, with the goal of providing quality, easily accessible healthcare to rural residents, particularly those who fall into disadvantaged categories.
• The National Urban Health Mission (NUHM) is one of two sub-missions of the larger National Health Mission (NHM), which was approved by the Union Cabinet in a decision dated May 1. The second sub-mission of the NHM is the National Rural Health Mission (NRHM).
• In particular, NRHM works to serve vulnerable populations in rural areas with quality, equitable, and cheap healthcare.

Hence, The National Rural Health Mission was launched in the year 2005.

The correct answer is Both (A) and (R) are true and (R) is the correct explanation of (A).

Key Points

• A tax system known as progressive taxation raises the tax rate as the taxable amount (often income) rises. In other words, the amount of income that is paid in taxes increases with a person's income.
• The tax rates of a progressive tax system are typically broken down into tax brackets. The tax rate for each income bracket varies and is applicable to a particular range of income. People pay varying tax rates on various components of their income, and the tax rate rises as income rises.

Hence, Both (A-A progressive income tax is based on equimarginal sacrifice.) and (R-Higher the income, lower will be the marginal utility of money for the tax payer.) are true and (R) is the correct explanation of (A).

The correct answer is 49%.

Key Points

• The coefficient of determination, which is the square root of the correlation coefficient (r) between Y and X, indicates how much variation in the dependent variable Y can be explained by the independent variable X.The coefficient of determination in this instance is as follows:
• r^2 = (0.7)^2 = 0.49
• The independent variable X can thus be used to account for 49% of the variation in the dependent variable Y. The remaining 51% of the variation in Y that X cannot account for may be caused by other variables.

Hence, In a two-variable regression, the correlation coefficient between dependent and independent variables Y and X is 0.7. 49% is the percentage of variations in Y explained by X